Bitcoin Passes $31,000 but Still Has Multiple Threats Which May Stall a Rebound

Bitcoin is down roughly 32% from the end of 2021, and last week concluded a record-setting nine consecutive weeks of losses. This week is the first of good news in nearly two months, ending 2.7% higher than seven days ago, according to The Bitpush Terminal. The price is finally recovering from the low of $25,919 earlier this month, although analysts believe there could be difficulty surpassing $37,000. 

According to Coin Telegraph, several factors drive this negative pressure, including rising interest rates, increased commodity prices, and growing concerns regarding equity markets.

30 average year fixed mortgage rates have nearly doubled from last fall's low, putting pressure on investors and absorbing free cash. According to the Federal Reserve Bank of St. Louis, home buying power is dropped by about 10% for every single point increase in interest rate. Investors trading crypto on margin feels the same burden. This decrease in cheap cash will reduce the amount of money able to prop the price of Bitcoin back up.

Furthermore, equity prices and Bitcoin have become increasingly correlated in recent years. Increased interest rates can put massive pressure on weak companies needing funding to stay afloat, and this can rightfully scare investors, dragging the price of Bitcoin along with it.

Market Sentiment, a Newsletter, said, "The grow at any cost phase (of crypto business investing) is coming to an end. More and more VCs and investors are asking founders to focus more on profitability than growth." This lack of new funding will slow new dollars entering the system.

Commodity prices driven by inflation are not helping matters. Although, in the long term, these risks promote a strong use case for Bitcoin, extra food and gas spending is impacting the amount of free cash willing to invest. According to Macrotrends.com, corn is up 134% since the fall of 2020, and soybeans are up over 40% this year alone.

Oil future traders fear prices may spike further to $150 a barrel relative to their current mark of just under $120 if China concludes its COVID-19 shutdown, according to a Cointelegraph article. If lockdowns end, it drives oil demand, and price follows. 

Fertilizer costs in the US are similar, up over 200% since January 2021. According to an article by Modern Farmer, this pricing is driven by massive supply chain disruption and chemical shortages and will likely continue into early 2023.

Michael Salor Tweeted, "Inflation in Europe has reached a 50-year high, emblematic of the collapse of the currency and contraction of the economy." Although he is making these statements in support of Bitcoin, in the near term, this can sadly drive the price in the wrong direction

Although market sentiment seems optimistic that the recent downturn is concluding, these issues will try to maintain downward pressure on the price of Bitcoin. 

Author: Garrett Meifert

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