In 2023, Bitcoin appears to be stable. However, it has only been a week.
Cryptocurrencies have crept into the new year, still licking their wounds from the 2022 devastation. The overall global crypto market cap has risen 5% since January 1 to $871 billion, but it is still down more than 57% from this time last year.
Bitcoin has gained 4.3% since the beginning of 2023, but has remained stuck in a narrow range between $16,500 and $17,300. According to Refinitiv Eikon data, the world's largest cryptocurrency's 7-day volatility has dropped to levels not seen since October 2018.
"It will be a year for the patient, as we do not anticipate prices nearing former all-time highs in 2023," said Vetle Lunde, senior analyst at Arcane Research.
Cryptocurrency spot trading volumes remained similarly subdued in December, falling 48% from the previous month to $544 billion, their lowest level since December 2019, according to CryptoCompare data.
While lower trading volumes are common at the start of the year, Arcane Research claims that the crypto market's apathy has been exacerbated by a "general exodus" of active retail investors.
However, after the bitcoin bloodbath of 2022, some market participants believe that subdued sounds pretty good.
"I feel encouraged by the floor we've seen forming under bitcoin, it shows there's a lot of demand around $16,000 and $17,000 levels," said Callie Cox, investment analyst at investment platform eToro.
Marcus Sotiriou, analyst at digital asset broker GlobalBlock, pointed to tightening Bollinger bands on bitcoin charts, a technical indicator that tracks price and volatility.
He added that the bands are at their tightest since July 2020, and that such tightening has historically preceded aggressive moves to the upside for bitcoin.
Lunde of Arcane Research echoed this possible scenario.
"These low volatility periods rarely last for long, and volatility compression periods have previously tended to be followed by sharp moves, even in stagnant markets," he said.
Furthermore, according to Coinglass data, funding rates for perpetual bitcoin futures have been positive since December 19, indicating that traders are betting on price increases and will pay to keep their long positions open.
Cryptocurrencies, on the other hand, remain vulnerable to macroeconomic headwinds as concerns swirl around a slowing global economy.
"The weaker economic outlook means people have less disposable income to invest in what they deem as risky assets like crypto," said GlobalBlock's Sotiriou.
Economic uncertainty may cause investors to flee to the safety of the US dollar, which is inversely related to bitcoin, according to Dalvir Mandara, a quantitative researcher at MacroHive.
"The macro backdrop is still bearish for crypto," Mandara added in a note on Thursday.
Meanwhile, crypto corporations are dealing with the fallout from Sam Bankman-FTX Fried's exchange.
Some major corporations have begun to lay off employees in an effort to cut costs, while Silvergate Bank reported a $8 billion drop in crypto-related deposits, sending its shares down nearly 43%.
(Source:www.reuters.com)
Cryptocurrencies have crept into the new year, still licking their wounds from the 2022 devastation. The overall global crypto market cap has risen 5% since January 1 to $871 billion, but it is still down more than 57% from this time last year.
Bitcoin has gained 4.3% since the beginning of 2023, but has remained stuck in a narrow range between $16,500 and $17,300. According to Refinitiv Eikon data, the world's largest cryptocurrency's 7-day volatility has dropped to levels not seen since October 2018.
"It will be a year for the patient, as we do not anticipate prices nearing former all-time highs in 2023," said Vetle Lunde, senior analyst at Arcane Research.
Cryptocurrency spot trading volumes remained similarly subdued in December, falling 48% from the previous month to $544 billion, their lowest level since December 2019, according to CryptoCompare data.
While lower trading volumes are common at the start of the year, Arcane Research claims that the crypto market's apathy has been exacerbated by a "general exodus" of active retail investors.
However, after the bitcoin bloodbath of 2022, some market participants believe that subdued sounds pretty good.
"I feel encouraged by the floor we've seen forming under bitcoin, it shows there's a lot of demand around $16,000 and $17,000 levels," said Callie Cox, investment analyst at investment platform eToro.
Marcus Sotiriou, analyst at digital asset broker GlobalBlock, pointed to tightening Bollinger bands on bitcoin charts, a technical indicator that tracks price and volatility.
He added that the bands are at their tightest since July 2020, and that such tightening has historically preceded aggressive moves to the upside for bitcoin.
Lunde of Arcane Research echoed this possible scenario.
"These low volatility periods rarely last for long, and volatility compression periods have previously tended to be followed by sharp moves, even in stagnant markets," he said.
Furthermore, according to Coinglass data, funding rates for perpetual bitcoin futures have been positive since December 19, indicating that traders are betting on price increases and will pay to keep their long positions open.
Cryptocurrencies, on the other hand, remain vulnerable to macroeconomic headwinds as concerns swirl around a slowing global economy.
"The weaker economic outlook means people have less disposable income to invest in what they deem as risky assets like crypto," said GlobalBlock's Sotiriou.
Economic uncertainty may cause investors to flee to the safety of the US dollar, which is inversely related to bitcoin, according to Dalvir Mandara, a quantitative researcher at MacroHive.
"The macro backdrop is still bearish for crypto," Mandara added in a note on Thursday.
Meanwhile, crypto corporations are dealing with the fallout from Sam Bankman-FTX Fried's exchange.
Some major corporations have begun to lay off employees in an effort to cut costs, while Silvergate Bank reported a $8 billion drop in crypto-related deposits, sending its shares down nearly 43%.
(Source:www.reuters.com)