Bitcoin (BTC-USD) is trading above the $20,000 level, up more than 30% from its lows in an impressive start to 2023. Although BTC is still down about 70% from its all-time high, I feel this is the last rally considering the technical structure in the context of recent developments, it is not just a “leap”.
After a year defined by extreme volatility, including high-profile crypto sector scandals, Bitcoin stands out as having survived the “crypto winter” and is poised to get even stronger. As we can see, the long-term bullish case for Bitcoin is as strong as ever with the added benefit of new macro headwinds. We are bullish on BTC and expect more upside ahead.
Why is Bitcoin collected?
Several factors help explain Bitcoin’s newfound momentum. First, we can bring up an improved market Sentiment across most asset classes has been reflected in a strong rally in equities over the past two weeks.
In late December, the pendulum swung somewhat from an environment of extreme pessimism with the market evaluating the latest economic data. A solid December payrolls report, along with an encouraging inflation update that showed CPI fell on a monthly basis, helped ease concerns about worst-case scenarios.
The setup is particularly positive for some of the worst-performing market segments in 2022, including next-generation technology and the speculative side of cryptocurrency. For all that Bitcoin is and can be, it still represents a segment of high-beta technology thanks to its association with blockchain applications. A reversal from that side helps explain some of the current strength.
Separately, these signs of easing inflationary pressures have opened the door for interest rates to stabilize, trying to accelerate the US dollar’s sharp swing as a global theme. In this case, Bitcoin as an alternative digital asset to fiat is rising now, bucking the high-end trends of foreign currencies and commodities such as gold (GLD).
The point here is to say that the rally in Bitcoin is not based on a single factor or headline, but rather a combination of several macro themes and market fundamentals. Still, we think there’s a bigger story to BTC than just higher risk assets. Developments specific to the crypto sector are also gaining momentum.
The gold standard of cryptocurrencies
If ever there was a time for long-running calls among crypto-skeptics for Bitcoin to crash and burn to zero, it would be 2022, but it’s standing firm here.
One of the biggest stories of the past year was the apparent overnight collapse of FTX, once among the world’s largest cryptocurrency exchanges. We argued in an article at the time that a bankruptcy would be positive for bitcoin, as it could mark the capitulation of the cryptocurrency selloff in 2022 and its final reset compared to self-aggrandizing exuberance. highs. That forecast is now starting to look good.
In our opinion, the FTX drop may have helped cement Bitcoin’s place as the “gold standard” of cryptocurrency, while the real losers are the smaller cryptocurrencies and token categories that will play a central role in the disappearance of cryptocurrency victims in 2022. FTX and other examples like work with “Celsius Network”.
We feel that new regulatory efforts being discussed by governments seeking tighter control of the cryptocurrency market will focus on this aspect of centralized exchanges and private coin offerings, which are sources of systemic vulnerabilities. There was a time in 2021 when any cryptocurrency-related startup could get away with just a flashy name. The difference now is that investors will be more skeptical of jumping on such ideas.
This leaves Bitcoin as the first and largest cryptocurrency whose decentralized public protocol is bigger than any popular character and has proven to be reliable. With this measure, Bitcoin was simply caught in the headlines without being directly involved.
To be clear, we still see a place for various cryptocurrencies, including established majors like Ethereum (ETH-USD), but the bigger takeaway is that the case for BTC is strengthening. The growing recognition of its importance as a store of value and alternative asset promises its continued demand as a form of money and payment beyond the scarcity value set by both small and large investors. In a long-term bullish situation for BTC, the upside potential has increased over the past year alone.
Fast forward to now, more than two months after the FTX collapse, we haven’t seen a wider financial contagion event in cryptocurrency. In our view, the relative stability in the price of bitcoin suggests that the worst is over and the market bottom is in, fueled by the current rally since then. We can also bring to the agenda reports that indicate that the FTX bankruptcy procedure is progressing. , recovering more than $5 billion in assets as a positive step in restoring confidence.
BTC Price Prediction
With expectations resetting and overall BTC supply consolidating among a smaller group of long-term “HODLers”, we believe this rally has room to continue. From here, the bullish call for BTC will need the macro picture and broader risk sentiment to remain positive, which reflects our overall optimism.
Looking at the chart, it is encouraging to see BTC break above $20k again, while also breaking the long-term downtrend line that has existed throughout 2022. In our book, that’s an even higher jump, and we see momentum building. as more traders and investors get on board.
At the same time, it is important to understand that there are major areas of technical resistance approaching. Ideally, we want to see BTC trend above $25k, which would bring the market back to levels from the first half of last year and show a more significant change in positive momentum. Moreover, $30,000 will be the next major goal as our initial forecast for 2023.
The other side of the debate considers ongoing risks. Even with a bullish forecast, the straight line will not be higher. It is important to remember that BTC and “crypto” remain speculative, which translates directly into recurring volatility. On the downside, holding $19k will be important for the bulls to maintain control, while a downside would force a re-evaluation on our part. A deterioration in the macro outlook, including the possibility of a sharp strengthening of the dollar, will also be bearish for BTC.
We noted ongoing discussions by global governments to add regulations to the sector or even ban it outright. Such headlines have the potential to undermine the bullish situation and must be monitored.