Cryptocurrencies and volatility go hand in hand, but when it came to the leading cryptocurrency bitcoin, there was less volatility as more traditional assets were racked with inflation fears and rising interest rates during the month of February.
“Bitcoin moved just 0.03% last month in United State dollar terms, making February 2023 likely its least volatile in history,” a Cointelegraph article noted as the cryptocurrency was traded within the $22,000 to $24,000 price level. “Data from Coinglass after the monthly close confirms that BTC/USD went practically nowhere for four weeks straight.”
Moreover, bitcoin’s price is actually up over 40% year-to-date compared to the S&P 500’s gain of 3.4%. The leading cryptocurrency’s price fell over 60% last year, making it a volatile experience for investors as it followed stocks and bonds downward amid inflationary and monetary policy tightening pressures.
That same correlation is spilling over into this year as markets push to rally though inflation and rising rate fears have crept back into the capital markets once again. As such, digital and traditional assets will once again remain fixated on the U.S. Federal Reserve with respect to monetary policy decisions for the rest of the year.
The Fed is aware that inflation won’t be going away anytime soon. Still, the lack of volatility during the month of February shows bitcoin’s maturation as an asset, especially with an influx of more institutional investors flooding the space.
Improving Risk Appetite
Despite interest rate fears, the global economy has been humming along, pushed even further with China’s reopening after the country dealt with a rise in COVID-19 cases. China’s recent macroeconomic data increased an appetite for risk, lifting bitcoin higher recently.
“China’s official manufacturing purchasing managers’ index rose to 52.6 in February, the highest in over a decade, following January’s 50.1, according to data released on Wednesday,” Coindesk reported. “A reading above 50 indicates an expansion of activity. Non-manufacturing PMI rose to 56.3 from January’s print of 54.4.”
“The positive news out of China, the world’s factory and largest trading partner of the U.S. and Germany, pushed the U.S. dollar lower against major currencies, lifting risk assets like bitcoin and stocks higher,” the report added.
Meanwhile, bullish bitcoin investors appear to be those who are looking beyond the short term. A Barron’s article noted that bitcoin has been seeing continuous buying from investors with a long-term horizon, confirming that it could still be an opportune time to buy the leading cryptocurrency and hold it for the long term.
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