What Should Bitcoin Investors Know About These Frozen Markets?

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Bitcoin markets have been relatively quiet lately. (Photo by Chesnot/Getty Images)

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Bitcoin markets have been relatively tame recently, with some measures of digital currency volatility hitting multi-year lows.

Earlier this week, the seven-day annualized volatility of cryptocurrencies fell to 10.64%, its lowest level since July 2020.

The digital asset has moved within a reasonably well-defined range over the past few weeks, trading between $16,000 and $17,000, according to figures from CoinDesk.

The relative lack of volatility is even more impressive considering everything that has happened so far this year.

The elimination of the terraUSD peg, the failure of the once-important FTX exchange, and the liquidation of Three Arrows Capital all generated significant visibility.

[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]

Keeping these developments in mind, several analysts gave their views on what market participants should pay attention to in the future.

In the past, cryptocurrencies were often lauded for their low correlation to the price movements of other assets, a characteristic that made them useful when it came to achieving diversification.

However, this situation has changed, as digital currencies have started to follow other asset classes, for example stocks, more closely over time.

Tim Enneking, managing director of Digital Capital Management, weighed in on this situation.

The biggest variable affecting BTC right now is, unfortunately, correlation, he said.

Assuming correlation remains high (and there is no reason to assume otherwise), crypto markets are beholden to fiat markets, which means inflation and interest rates, he said. he declares.

Since interest rate increases (first derivative of the first-year calculation) have already started to slow, and they will almost certainly stop no later than mid-March (after likely a final 50 bp increase base on Feb 1, then a first and last increase of 25 bps), I wouldn’t be looking for a major breakout for BTC until then.

Enneking was referring specifically to the numerous rate hikes that Federal Reserve officials have implemented this year, which have caused the target range for the benchmark federal funds rate to rise by 425 basis points since March.

Going forward, many market watchers expect the Fed to raise the benchmark rate further, although no one knows for sure how much it will rise.

Members of the Federal Open Market Committee expect the federal funds rate to peak at 5.1% next year, according to the median forecast provided by officials who attended last month’s policy meeting. These results were included in the Summary of Economic Projections, a document released on December 14.

After commenting on the aforementioned developments, Enneking offered a short-term outlook for the digital currency.

The good news is that BTC is setting a really solid bottom which, however, leaves everyone haunted by the apparent floor at $6,000 from late June to early November 2019, which looked like a solid bottom until it falls and BTC has risen to $3. +k for four months, he said.

Since the fallout from Celsius, Terra/Luna, FTX, Alameda, etc., has slowed markedly, we feel we were at or very near the bottom (which is $15.5000), a said Enneking.

As strange as it may sound to write this sentence, a few good days on Wall Street, and we should see BTC threatening $20,000.

Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital, also weighed in on the near-term outlook for cryptocurrencies.

Right now, many are predicting a capitulation below $10,000, he said.

However, we don’t think the chances of such a possibility are any higher than Bitcoin hitting around $13-15,000.

Marc Bernegger, co-founder of crypto fund of funds AltAlpha Digital, also chimed in, offering a different take on the matter.

Bitcoin has already gone through similar phases over the past few years that could be summed up as periods of ignorance and disinterest, he said.

We have seen several very negative events over the past few weeks and months and many investors have lost faith in Bitcoin as a potential hedge during traditional market downturns, Bernegger said.

Many fundamentals point to a floor at actual price levels and investors like hedge funds, family offices and asset managers are waiting on the sidelines to (re)allocate some of their alternative assets into Bitcoin, he said. he adds.

Disclosure: I own bitcoin, bitcoin cash, litecoin, ether, EOS, and sol.

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