After months of decline, bitcoin (BTC) seems to be recovering. While some analysts see this as a sign of a resurgence of the crypto queen, others, on the other hand, are more skeptical. For the latter, caution is in order.
“Reversion to the mean of bitcoin (BTC)”?
According to a study published Monday, January 23 by AllianceBernstein (AB), an investment management service provider, the surge in bitcoin (BTC) is not the effect of market chance. If the queen of cryptos has regained color since the beginning of the year, it is because of the return to normal theory. It is a financial principle according to which, some of the variables of an asset such as its price, its rate or its volatility tend to return to an average value after having displayed extreme values.
In the case of bitcoin (BTC), which in 2022 lost more than 65% of its market value, AB believes that the rise in recent days is related to the gains in the crypto market. The situation resulted in a reversion to the mean, giving the impression of a sudden uptrend.
The latter has been boosted by some recent events that have boosted user confidence. Among these, the sale of Grayscale Bitcoin Trust (GBTC) which could no longer take place since an agreement is being negotiated between the stakeholders or even the echoes of a potential regulation on the trading of cryptos, coming from Hong Kong.
You don’t have to get carried away!
According to AB, analysis that suggests bitcoin (BTC) has begun a sustained growth rally would be misleading. Even if that were the case, the latter could not be maintained over time.
For this to be the case, this increase must be carried “new capital allocations”. However, for the moment it is only a question of “capital internal to deployed cryptos”, analysts say Gautam Chugani and Manas Agrawal. These circumstances therefore call on investors to be cautious.
Although there are some positive signs of the potential recovery of the crypto market, we should not hide the fact that since its existence, bitcoin (BTC) has never experienced two successive years of negative returns. Is this yet another sign of a triumphant return of the crypto queen?
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