Bitcoin extended its gains over the weekend ahead of Lunar New Year and Spring Festival celebrations across Southeast Asia, hitting its highest level since August.
The number one cryptocurrency soared above $23,000 on Saturday, gaining up to 10% at one point from the previous day, according to data from CoinMarketCap. The cryptocurrency hit a high of $23,282, a level not seen in over five months. At the time of writing, Bitcoin is trading around $22,900, a nearly stable level over the past day.
Ethereum, the second-largest cryptocurrency, also posted strong gains, hitting a local high of around $1,674.a level not seen since September of last year, when its long-awaited Merge update has been achieved. The total market capitalization has crossed the $1 trillion mark.
This increase occurred while the Bitcoin has historically performed well at the start of the Lunar New Year holiday celebrated across much of Asia, often referred to as the Chinese New Year. According to Markus Thielen, Head of Research at Matrixport, the lunar new year holiday is considered a good entry time for investors. He stated:
“Buying Bitcoin at the end of the first day of the Chinese New Year and selling it 10 days later would have gained an average of +9% over the past eight years (2015-2022) all recorded positive returns. The start of the Chinese New Year was an interesting entry point for longs.”
Bitcoin and Ethereum are up about 38% and 35% year-to-date. While a number of factors may have impacted the cryptocurrency’s impressive start to the year, the market managed to gain momentum after new data released by the US Department of Labor last week indicated a slowdown in inflation.
The annual rate of inflation fell to 6.5% in December from 7.1% in November. Lower inflation is generally considered bullish for risky assets such as cryptocurrencies, as it puts pressure on the US Federal Reserve to slow interest rate hikes.
The bulls Cryptocurrencies (bulls) expect market to continue its bullish move, predicts Sean Farrell, head of digital assets strategy at Fundstrat Bitcoin is reaching between $35,000 and $44,000 this year, and Ethereum between $2,400 and $3,200. However, he still cautioned investors to be wary of near-term risks. He stated:
“Despite our view that all-time lows have been reached for major cryptocurrencies, however, we believe there are some near-term risks to be aware of. These include the fallout related to the GDC, a renewed attack on risk assets at the next FOMC meeting and the fact that, despite the recent rally, we are still in the midst of what we see as a domino bear market.”
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