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Another Red Daily Close Puts Bitcoin Below $23,000, Is Recovery Expected?

Bitcoin has seen another red daily close after a tremendous rally from last week. This has now wiped off most of the gains made during this time period and has left the digital asset struggling below $23,000 once more. The momentum has quickly died down as the news of the recession settled in. Its viability as an inflation hedge is once more called into question given its performance so far this year.

Is Bitcoin Still A Good Bet?

Bitcoin being an inflation hedge, has been one of the selling points for the digital asset. This is due to its performance on a year-over-year basis compared to other financial markets over similar time frames. Since these financial markets, such as the stock market, have been unable to keep up with the high inflation rate, investors had naturally flocked to bitcoin as yearly returns trumped the inflation percentages.

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That is, until a bear market where bitcoin’s performance as an inflation hedge starts to shake. An example is the bear market that is currently being experienced in the market. This decline has seen the digital asset lose about 44% of its value during this time and inflation continues to hit 40-year highs. But on a month-to-month basis, bitcoin has outperformed prominent markets such as the S&P, giving credence to its ability to give reasonable returns even during a bear market.

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Bitcoin price chart from TradingView.com

BTC sees another red daily close | Source: BTCUSD on TradingView.com

Bitcoin has been up more than 20% in the last month, while the S&P is up only 8%. But on a yearly basis, the market is down significantly less than bitcoin at 5.8%. So while bitcoin has shown to be a good bet when it comes to hedging against inflation, it remains a choice for investors with a large risk appetite.

Market Sentiment Points To Recovery

The crypto market crash back in June had sent the market sentiment deep into the extreme fear territory. This would persist for a couple of weeks as the prices of cryptocurrencies struggled to recover their lost value. However, it would quickly change when bitcoin saw a swift recovery in its price back in July.

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Bitcoin had made it back above $24,000 once more, and this had sparked faith in the hearts of investors once more. Sentiment had recovered along with the price and towards the end of the month had grown to a high score just below 30 on the Fear & Greed Index. This score still put it in the fear territory but was a remarkable recovery in sentiment nonetheless.

Now, even with the decline, data shows that investors are still maintaining positive sentiment towards digital assets such as bitcoin. One thing that positive sentiment drives are accumulation, and accumulation leads to recovery. Bitcoin just needs to hold above the $22,700 support and close with a higher price for a bounce back above $23,000.

Featured image from Outlook India, chart from TradingView.com

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