Bitcoin and Ethereum to fight growing liquidity pressure in 2023, here’s what to expect

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Bitcoin and Ethereum prices wiped out all gains from the euphoric highs of 2022 under mounting selling pressure in the bear market. November-December economic data shows signs of recession in the US and Europe, the Fed may remain hawkish. Traders in the interest rate market expect rates to peak in March 2023, increasing liquidity in cryptocurrencies like Bitcoin and Ethereum.

Bitcoin and Ethereum could see a spike in liquidity pressure in the first quarter of 2023 as the US Federal Reserve maintains its hawkish policy. Mid-term sentiment in the options market remains bearish. A crypto price rebound is far from based on the macro outlook.

Also read: Bitcoin on the verge of undervaluation as stablecoin reserves fall to pre-2021 bullish levels

Bitcoin and Ethereum prices could crash under pressure from sellers

Bitcoin and Ethereum prices plunged with mounting selling pressure in 2022. The top three factors influencing crypto prices were the US Federal Reserve’s hawkish policies favoring higher interest rates to curb the inflation, the collapse of the Terra LUNA, UST token ecosystem and the spread of the FTX contagion.

According to analysts at Blofin Academy, the first half of 2023 will see Bitcoin and Ethereum facing severe liquidity pressure. Economic data for November and December showed that signs of recession in the United States and Europe are apparent. While the US economy remains strong, there is enough evidence that the US Federal Reserve will maintain a hawkish policy through 2023.

High inflation leaves the European Central Bank no choice but to raise interest rates aggressively.

EU and US inflation rates

Experts estimate that the US Federal Reserve’s maximum interest rate will remain in place for at least six months and that rates are expected to peak in March 2023.

Liquidity pressure on the two largest cryptocurrencies by market capitalization, Bitcoin and Ethereum, will therefore remain high.

Investor Sentiment in Options Remains Bearish

In the options market, mid-term sentiment is relatively bearish.

Sentiment has not improved since the start of 2022. Institutional and professional investors are focused on the options market, so an analysis of the changes helps to effectively judge the direction of the crypto market.

The options-based crypto industry, which includes centralized/decentralized options trading business, structured products, options market data analysis, will grow further in 2023 as more professional institutions , market makers and individual investors will join the market. Bitcoin and Ethereum holders could suffer further in the first quarter of 2023 as selling pressure on these risky assets increases.

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