As the first trading month of 2022 comes to an end, volatility has returned to the cryptocurrency markets, but many analysts believe that Bitcoin could once again settle in around the $40,000 pricing level over the next few weeks. When BTC/USD plunged to $33K on January 24, digital currency investors started to ask themselves: What may have caused the rapid decline of Bitcoin's price? And which are the main reasons why Bitcoin has been quickly rebounding towards $36,000?

Bitcoin’s price is being increasingly influenced by the U.S. Dollar. Investors are trading away Bitcoin and exchanging it for dollars on U.S. based exchanges such as Coinbase, Kraken and Binance, according to BitcoinCharts.

According to analysts at Bloomberg, BTC’s price drop to around $33,000 on Jan. 24 was directly caused by an increasing demand for dollars in the U.S. Bitcoin’s price fell after BTC fell to a record $19,000 in December 2017 and was later on hit by the U.S. tax holiday and a Bitcoin Cash hard fork in November.

When we look back at the history of Bitcoin's numerous crashes, investors in the United States usually start to turn back to the dollar after BTC’s price reaches record-high levels. According to news reports published by Reuters in January, investors were seeking low-risk currency assets and turning away from Bitcoin. It is important to remember that many Wall Street institutional investors are now engaged in Bitcoin trading, and this means that we should expect volatility to remain for a few more months as the market adjusts.

Another thing to take note of is the number of Bitcoin investors who were previously selling their digital currency when they saw a price drop. Now, as the $40,000 price target is once again within sight, these investors are buying back Bitcoin. The U.S. Federal Reserve’s balance sheet has been expanding to try and stabilize the economy, and now it has made cryptocurrencies an interesting asset for investors. When it comes to the long term, investors are seeking the digital currency as a safe haven because of the economic volatility they are facing, while traditional assets such as Gold and U.S. stocks cannot be used as a store of value or a safe haven at this time.