It is here great unknown this new year: how will institutions pressure cryptos? Since the creation of blockchain, Bitcoin and other tokens have suffered from the threat of regulation on the one hand and the consequences of monetary policy on the other, especially since BTC is an integral part of the allocation of large funds, and is related to the policy monetary. the performance of traditional stock markets.
In recent years, especially in 2021, BTC has shown a great sensitivity to the macroeconomic context. This is how we see how much cryptoassets have become more democratized. So what is in store for us in 2023 regarding the macroeconomic threat to BTC from the Fed?
Back the bullrun or just catching up?
Lyn Alden, the economist warns: there is no guarantee, according to her, that the strong upward movement from the beginning of this year on cryptos will continue after January, because the rest will be fundamentally driven by the economic context.
However, many observers are beginning to believe. In question ? The fact that Bitcoin has reached maintain their current levels, after an increase of more than 30% since the beginning of the year. Something to be optimistic about, because the BTC doesn’t even seem to be looking for a possible consolidation at the moment, let’s agree.
Alden therefore orders that the evolution of Bitcoin is fundamental linked to market liquidity conditions, which has only improved since the end of 2022. As a result, Bitcoin seems to have completely digested the FTX crisis, as it has been trading for the past few days just below $23,000, its summer 2022 price.
Lyn Alden also makes an interesting point. It is often said that over time and deepen connections cryptos to the traditional market, BTC is closely linked to indices and stock markets, and this correlation is easily verified on the charts.
However, due to FTX’s bankruptcy, BTC and its peers were completely decoupled from stock markets and star indices such as the S&P500. According to the economist, we are witnessing that at the moment kind of catch up, BTC is mechanically coming back to its correlation with the classical economy, to bring back liquidity.
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Probably a zone of turbulence
Before we rejoice in advance, we must consider that significant obstacles could block the return of the old levels in the cryptocurrency market. In one of them called the Federal Reserve, or FED, in other words the central bank of America, incidentally the most powerful in the world.
The second, in response to galloping inflation, began with raise its prime rates, which has the effect of reducing the liquid quantities circulating in the economy. This change is taking place when we have just gone through an “open bar” period with the titanic Covid recovery plans.
According to Alden, the current liquidity conditions are only good cyclical, and short-term, since they are due to the reduction of cash operated by the US Treasury, which adds liquidity to the financial markets.
What to expect from the coming months?
Furthermore, once the Treasury has cleared its cash accounts so that it does not exceed the constitutional limits in terms of debt, it is likely to resume its quest to gradually restore them, which will withdraw liquidity from the market at the same time the FED will also take advantage of it through its rate hikes.
This is where the biggest obstacles for Bitcoin are likely to arise, and it will certainly no longer have the breathing room it currently enjoys.
Alden, however, tempers her speech by stating that when this difficult period is over, she insists around the second half of 2023, there are good reasons to expect Bitcoin to take off and break out of its recent lows. Therefore, buying Bitcoin to prepare for such an environment could be quite tempting assuming that its ATH in 2020 was $69,000 and that he seems to be on a step up.
However, it will therefore be necessary to be vigilant in his portfolio management in mid-2023, since tension on liquidity granted to the market he has a good chance of showing up. It may be appropriate, therefore, to reduce the risks and there is no need to position themselves at the current highs.
On this same topic you know 5 things Bitcoin this week.