The crypto market and Bitcoin (BTC) prices experienced a slight setback at the beginning of this week, which was anticipated by experienced traders. This setback involved a slight retraction of the profits made in January.
On Feb. 9, the SEC issued an enforcement measure against Kraken exchange and informed the public that staking-as-service programs are not governed by regulations. Consequently, the crypto market suffered a dip and due to Kraken’s cessation of all its staking services, traders have become worried that Coinbase may have to follow suit.
The inquiry at hand is, has this week’s price action indicated a transition away from the bullish trend observed in the course of January, or is the information regarding “staking services being unregistered securities” just a minor incident that traders will overlook in the upcoming weeks?
Delphi Digital analysts predict a turbulent 2023 for crypto. Kevin Kelly and Jason Pagoulatos attribute the start of the year’s price action to the global liquidity increases that are beneficial to risk assets. However, they both agree that macroeconomic difficulties will persist until the third quarter of the same year.
This week’s negative news about cryptocurrencies has had a big impact on their prices, but there are a few data points that give us an idea of what the rest of the year could be like for the crypto market.
Big Smokey from Cointelegraph newsletter has observed the recovery of the US Dollar index from its recent low levels.
In a recent statement, Big Smokey declared:
The inverse relationship between Bitcoin (BTC) and the U.S. dollar index (DXY) is clear. DXY has seen a decline recently, having fallen from a peak of 114 in September 2022 to its current level of 101. Consequently, BTC’s price has increased in response.
This week, DXY is rising from its Jan. 30 low of 101, advancing to a five-week high around 104. Coinciding with this, BTC went up to $24,200 before beginning to slide as DXY made its ascent.
JJ, an analyst from JLabs, stated that…
For quite some time, both retail and institutional traders have forecasted a shift from the U.S. Federal Reserve concerning its interest rate raise and quantitative tightening policies. While some may believe the recent, and coming rate hikes being decreased is verification of their prophesy, Powell suggested the necessity for future rate hikes in his most recent FOMC presser. Additionally, in a open discussion with David Rubenstein at the Economic Club of Washington, he stated:
Delphi Digital’s analysis suggests that investors are daring the Federal Reserve to act, and the data points to the bond market indicating that the Fed’s stance is too rigid.
In 2022, when the Federal Open Market Committee (FOMC) announced rate hikes that were in line with the expectations of the market, a rally occurred in both the equities and cryptocurrency markets. Those who were paying attention to the crypto markets will recall that everyone was eagerly awaiting the pivot from Powell before making significant investments in major cryptocurrencies.
Analyzing the charts, it wouldn’t be too far-fetched to expect a retest of the $20,000 area of support, especially after Bitcoin’s 40% growth in the month of January.
Delphi Digital analysts, analyzing historical facts and fractal analysis, indicate there is room for more growth in BTC as there isn’t a lot of BTC available in the $24K – $28K range. Cointelegraph previously underlined the significance of Bitcoin’s golden cross.
The recent positive news surrounding CPI components and the labor market have given rise to fears that crypto has yet to reach bull market status. Moreover, an increase in interest rates, which are already being implemented, would add to operational and capital costs for companies and ultimately be felt by consumers. Additionally, ongoing layoffs at major tech corporations remain a cause for concern.
Financial institutions and brokerages in the U.S. remain reducing their earnings outlooks, and tech firms often serve as an indicator of how stocks, earnings, and job cuts are developing. The direct correlation between the stock market and Bitcoin, in conjunction with economic troubles, suggest that the current crypto boom is likely not long-lasting. Therefore, it is prudent to stay mindful of this.
Should the much-anticipated “Fed pivot” fail to come to fruition, then certain realities will become more prominent, and their influence on the pricing of crypto and stocks will become more pronounced.
Although the troubles highlighted above offer a more pessimistic perspective, the analysts at Delphi Digital are looking ahead to a rosier future for the second half of 2023. Their research has revealed:
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