Jan 10 (Portal) – Bitcoin looks stable in 2023. But it’s only been a week.
Cryptocurrencies have crept into the new year licking their wounds after the carnage of 2022. The total global crypto market cap is up 5% to $871 billion since Jan. 1, but it’s still up over 57% dropped at this point last year.
Bitcoin itself has gained 4.3% since the start of 2023 but has remained in a tight range between $16,500 and $17,300. The world’s largest cryptocurrency has been eerily subdued, with its 7-day volatility falling to levels not seen since October 2018, according to data from Refinitiv Eikon.
“It’s going to be a year for the patient as we don’t expect prices to get anywhere near previous all-time highs in 2023,” said Vetle Lunde, senior analyst at Arcane Research.
Cryptocurrency spot trading volume remains similarly subdued, having plunged about 48% mom to $544 billion in December, its lowest level since December 2019, data from CryptoCompare showed.
While lower trading volumes are common around the turn of the year, crypto market apathy has been exacerbated by a “general exodus” of active retail investors, according to Arcane Research.
However, to some market participants, muted after the Bitcoin bloodbath of 2022 sounds pretty good.
“I’m encouraged by the floor we’ve seen under Bitcoin, which shows there’s a lot of demand around the $16,000 and $17,000 levels,” said Callie Cox, an investment analyst at investment platform eToro.
So what happens now?
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THE bull story
Marcus Sotiriou, an analyst at digital asset broker GlobalBlock, pointed out the narrowing of Bollinger Bands — a technical indicator that tracks price and volatility — on Bitcoin charts.
The bands have been tightest since July 2020, and such narrowing has historically preceded aggressive moves higher for Bitcoin, he added.
This possible scenario was repeated by Lunde of Arcane Research.
“These periods of low volatility rarely last long, and periods of volatility compression used to tend to be followed by strong moves, even in stagnant markets,” he said.
Additionally, funding rates for bitcoin perpetual futures have been positive since Dec. 19, according to Coinglass data, meaning traders will be betting and paying to keep their long positions open.
THE STORY OF THE BEAR
On the other hand, cryptocurrencies remain at the mercy of macroeconomic headwinds as concerns swirl about a slowing global economy.
“The weaker economic outlook means people have less disposable income to invest in what they see as risky assets like crypto,” GlobalBlock’s Sotiriou said.
Economic uncertainty could prompt investors to run for the safety of the US dollar, which tends to be inversely correlated with Bitcoin, said Dalvir Mandara, quantitative researcher at MacroHive.
“The macro backdrop is still bearish for crypto,” Mandara added in a note on Thursday.
Meanwhile, crypto companies are facing the fallout from the collapse of Sam Bankman-Fried’s FTX exchange.
Some big companies have started laying off employees to cut costs, while Silvergate Bank (SI.N) reported an $8 billion drop in crypto-related deposits, causing its shares to plummet nearly 43%.
Reporting by Lisa Pauline Mattackal in Bengaluru; Editing by Pravin Char
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