The cryptocurrency world is anything but static, and over the last several months, Bitcoin has been on a rollercoaster ride of highs and lows. Trading around $23,000, after having risen 35% since January, Bitcoin is still trying to find its feet amidst inflationary pressures, monetary policy, and a number of industry-specific issues. Additionally, Bitcoin’s path “is not straight,” according to Paul Eisma, head of trading for XBTO Group, amid an overabundance of BRC-20 meme coins, the suspension of withdrawals over the weekend, and a shift in profits to altcoins and Ethereum.
Overabundance of BRC-20 Meme Coins Causing Congestion and Withdrawal Suspension
The root of the problem appears to be an overabundance of BRC-20 meme coins on the Bitcoin network, which sparked both the Ordinal-induced congestion and Binance’s suspension of withdrawals.
According to 21Co co-founder and CEO Hany Rashwan, while meme coins don’t fall into the same league as altcoins in terms of utility and function, meme coin holders are taking profits and moving away from a congested Bitcoin and into more profitable ventures.
“These altcoins are essentially smart contract platforms that facilitate a range of functions, including but not limited to meme coins and NFTs,” he said.
An expected increase in interest rates?
But this doesn’t just affect the traders, so to speak. It’s also affected the investors in Bitcoin too. The liquidity drop on the major markets, caused by the newly inflated BRC-20 meme coins, has forced many projects to delay their token launches while other investors have suffered considerable liquidation losses in the past week.
Additionally, the current inflation rate being experienced in the market is still above the two percent mark that the U.S. Federal Reserve is seeking; as a result, many fear that the Fed will still increase interest rates, despite the obvious detrimental effects it would have on asset markets.
Market Fluctuations Shake Bitcoin, Ether Holds Steady
As a result of these market fluctuations, Eisma explained that “this is part of the growth and evolution of the network, and the path is not straight.” For now, all investors can do is watch Bitcoin closely and hope that it manages to find its feet soon. Of course, that doesn’t mean that everyone agrees with him, as plenty of analysts remain unconvinced that the rally will last.
But while we wait to see if Bitcoin can weather these storms, Ether continues to remain at the top of the cryptocurrency food chain, having remained well above $1600. With an 8% decrease in the ETH/BTC pair since January 11th, and the relative strength index for the ETH/BTC pair has dropped to levels last seen in December, there could potentially be a bullish investment opportunity with Ether.
CPI Release and Fed’s Next Move
At the end of the day, much of this will hinge on the upcoming May Consumer Price Index (CPI) release and the Federal Reserve’s next move. Ultimately, all we can hope for is that the market steadies, and that some semblance of normality is maintained. But after the hectic week we’ve had, it looks like only time will tell.
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