QCP Capital Releases 2023 Crypto Predictions: 3 Themes to Watch

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Trading desk QCP Capital recently released its crypto predictions for 2023 on its latest edition of Just Crypto. The company highlighted key moments in recent years, their potential impact at the start of a new year, as well as future digital assets and the global market.

The report highlights year-to-date 2022 performance for global assets. The market had its worst year for benchmark assets, such as Bitcoin, S&P 500, Nasdaq 100 and others.

Except for natural gas, other assets saw their worst losses since the 1970s. Bitcoin (BTC) alone crashed more than 70% from its all-time high, while Ethereum ( ETH) recorded a loss of 72%. This negative performance was a by-product of the most pronounced rate hike cycle in recent history by the US Federal Reserve (Fed).

The most pronounced US Fed interest rate hike program compared to other periods. Source: QCP CapitalCrypto Forecast: what you need to watch out for

According to the crypto forecast from QCP Capitals, the Fed is likely to continue to pressure the markets. The financial institution is trying to bring inflation down from a peak of 9% to its target of around 2%. Thus, the Fed raises its interest rates and unwinds its balance sheet.

While inflation has likely peaked at these levels, QCP Capital believes the market will see sticky or persistent inflation. In other words, the financial institution will have a hard time bringing inflation down to its target.

This scenario could worsen if commodity prices, such as oil prices, rise above $100. According to the report from the trading desks, this is not the first time the Fed has faced a similar scenario.

In the 1970s, the financial institution raised interest rates and lowered inflation, but the measure rebounded when oil prices rose. The war between Ukraine and Russia could have consequences similar to those of the 1970s and fuel inflation.

As a result, the upside potential for Bitcoin and risky assets could be capped as long as inflation remains sticky. Additionally, QCP Capital believes that the Fed’s Federal Open Market Committee (FOMC) is unaware of the dangers of rising inflation.

Therefore, the financial institution will adopt a crash of risky assets, such as crypto, and ignore the pain of investors. QCP Capital said the following on what could be one of the key elements of its crypto predictions:

This will lead them to accept a recession rather than risk a rebound in inflation, even if the spike in inflation is again due to supply-side shocks. In terms of recession probabilities, we are now above Covid 2020 highs and rapidly approaching GFC 2008 and Dot.com 2001 levels.

The price of BTC is moving sideways on the daily chart. Source: BTCUSDT TradingviewCryptos hopes at the end of the tunnel

There is upside potential if the Fed rushes to ease monetary policy. In recent months, some representatives of financial institutions have hinted at this possibility.

If this faction is successful, the global market could experience a sharp rebound, including Bitcoin and other cryptocurrencies. The US Dollar, represented by the DXY Index, will continue to function as a direct hurdle for digital assets.

Regarding the technical analysis, the DXY index has recorded losses over the past six weeks, but is expected to rebound from its current levels. This bullish price action could take the dollar back to 120, penalizing global currencies, equities and asset risk. A break below these levels could trigger an opposite scenario.

DXY index at critical support with a probability of rebound. Source: QCP Capital

As of this writing, Bitcoin (BTC) is trading at $16,600 with sideways movement on the daily chart. BTC/USDT chart from Tradingview.

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