This week was filled with surprises for even those haven’t been a part of the crypto niche. Bitcoin [BTC] and other cryptocurrencies continued their climb.
Now that Bitcoin is above a historical accumulation signal, the question is can it reclaim its title as the inflation hedge?
Earlier this week, after the 75 bps Fed Reserve rate hike, the Biden administration confirmed that the country had entered a technical recession. After the country’s GDP contracted in the second consecutive quarter, the situation worsened. However, the crypto market recovered over $124 billion in the same duration between 26 July and press time.
Total crypto market cap | Source: TradingView – AMBCrypto
Bitcoin benefitted from the broader market bullish cues. It rose from the lows of $19k to $20k and could be seen trading at $23,919 at the time of writing.
Additionally, as of now, two significant developments are on the horizon for Bitcoin. The first being the reclamation of the 23.6% Fibonacci level and the other being the escape from the market bottom.
Bitcoin price action | Source: TradingView – AMBCrypto
The gradual incline from the June lows helped Bitcoin grow sustainably and reach the current trading price and the Fibonacci level, from the lows to the April market top, exhibit BTC’s next critical stop to be $26k.
This price point sits slightly above the 23.6% Fib line, which is crucial for BTC as it can provide the support Bitcoin needs to carry its rally. Secondly, as per the market value of the king coin, the recent rally enabled it to pull itself out of the market bottoms, which BTC reaches when the asset is highly undervalued. After lingering in the same for more than a month for the first time in 28 months, this is a win for Bitcoin.
Bitcoin market value | Source: Glassnode – AMBCrypto
Thus, with the win comes the worry for BTC’s future as the coin and crypto market are not acting individually. The correlation that the king coin shares with the stock indices is still considerably high as both NASDAQ and S&P 500 indices have risen equally in the same duration this week.
Thus despite the recovery, Bitcoin is still in no position to act as an inflation hedge. This makes investors far more vulnerable thanks to the worsening economic condition.