(Our weekly analysis on the wild world of cryptocurrencies)
Lisa Pauline Matakal
Jan 10 (Reuters) – Bitcoin looks to be stabilizing in 2023, but it’s only a week away.
Cryptocurrency has crept into the new year after the 2022 massacre, licking its wounds. Overall cryptocurrency market capitalization has risen 5% since January 1 to $871 billion, but is still down more than 57% from this time last year.
Bitcoin itself has risen 4.3% since the beginning of 2023, but remains in a narrow range between $16,500 and $17,300. Data from Refinitiv Eikon shows that the world’s largest cryptocurrency is eerily subdued, with its seven-day volatility dropping to levels not seen since October 2018.
“We don’t expect prices to approach all-time highs in 2023, so it will be a year for patients,” said Vetle Lunde, senior analyst at Arcane Research.
According to data from CryptoCompare, spot cryptocurrency trading volume fell about 48% month-on-month to $544 billion in December, the lowest level since December 2019.
Apathy in the cryptocurrency market is exacerbated by a “general outflow” of active retail investors, according to Arcane Research, although a decline in trading volumes is common at the turn of the year.
However, to some market players, holding back sounds pretty good after the 2022 Bitcoin chaos.
Karrie Cox, an investment analyst at investment platform eToro, said: “We are encouraged by the lower bound that formed below Bitcoin, which shows a lot of demand at the $16,000 and $17,000 levels.
So what happens now?
Marcus Sotiriou, an analyst at digital asset broker GlobalBlock, has noted a tightening of the Bollinger Bands (technical indicators that track price and volatility) on the Bitcoin chart.
The band is the tightest since July 2020, and such a tightening has historically preceded bitcoin’s aggressive move upwards, he added.
This possible scenario was repeated by Lunde of Arcane Research.
“These periods of low volatility are rarely long lasting, and periods of volatility compression have previously tended to be followed by sharp moves, even in stagnant markets,” he said.
Additionally, Coinglass data shows that perpetual bitcoin futures funding rates have been positive since December 19, with traders betting on higher prices and paying to hold long positions. means
On the other hand, cryptocurrencies continue to be tossed by macroeconomic headwinds amid concerns about a slowing global economy.
“The worsening economic outlook means less disposable income to invest in risky assets like cryptocurrencies,” said Sotiriou of Global Block.
Macrohive quantitative researcher Darvil Mandala said economic uncertainty could cause investors to flee for the safety of the U.S. dollar, which tends to be inversely correlated with bitcoin.
“The macro backdrop remains bearish for cryptocurrencies,” Mandala added in a note on Thursday.
Meanwhile, cryptocurrency companies are facing the impact of Sam Bankman-Fried’s FTX exchange collapse.
Some big companies have started laying off employees to save costs, with Silvergate Bank reporting an $8 billion drop in crypto-related deposits and a nearly 43% plunge in shares.
(Reporting by Lisa Pauline Matakkar, Bangalore; Editing by Pravin Char)