February 2023 – Advisor Forbes INDIA

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After a tough and challenging period of downturns and dips, the cryptocurrency market is finally seeing bullish momentum on the back of relaxed global macro headwinds and easing inflation. The global crypto market capitalization has crossed over $1 trillion market, supported by high and stable trading volumes.

The crypto market posters – Bitcoin and Ethereum – have shown incredible stability and both have managed to trade in a positive range for the past month. global conditions and in particular in the key US and UK markets.

Let’s take a look at the main reasons that made the crypto market bullish and what investors should approach in this unexpected crypto rally.

Crypto markets on the road to recovery

Overall, the broader cryptocurrency market gave a new pump this year with major coins leading the way. The world’s largest cryptocurrency, Bitcoin, rebounded strongly and traded near the $23,500 levels with a positive change. Since its lowest point in 2022 – $15,523, reached on November 9, BTC has shown a rally of almost 40% in the month of January 2023, which reached a 30-day high of $23,954 on January 29, 2023 .

Similarly, Ethereum has also shown immense strength and surged nearly 5% in the past week, with the current price trading at $1,644.

The altcoin market has also performed very well and has shown major strength over the past couple of weeks. ADA and SOL have risen by more than 20% each since the start of 2023. However, other altcoins such as AVAX (82%), FTM (143%) and in particular APT (382%) have recorded an impressive performance in January compared to last year. The broader crypto market is trading “green,” which is something crypto investors delight in.

All major cryptocurrencies faced a massive correction until the end of last year, following the collapse of crypto exchange FTX in November 2022. The crypto market ended the year 2022 with a staggering approach. However, it is quite evident that the bulls are back in the show in 2023.

How did the crypto market turn bullish?

The cryptocurrency market recorded positive signs due to the ease of macroeconomic activities, which led the price of crypto to rally. Additionally, the overall trading volume in the crypto market has recovered to levels not seen since June 2021.

This rally in the crypto market was mostly seen as the US Federal Reserve decided on a minor 25 basis point (bps) rate rather than a 75 bps hike amid a slowing economy. inflation, solid employment data and a pick-up in GDP figures. The Fed was expected to take an aggressive approach and hike interest by 75 basis points. Thus, the current 25 basis point interest rate hike has been met with a positive note by crypto market participants, implying that the Fed could be on the winning side in its battle against inflation. .

Moreover, the rate hike decision also had a direct impact on the US Dollar and weakened it to a large extent, as the weakness of the Dollar has always pushed up the price of cryptocurrencies.

Not only the US market, but several macro factors also indicated slight signs of recovery in China and other major global economies. Besides these factors, the reopening of China’s borders almost after three years of Covid-19 closure and other central banks’ efforts to fight inflation have improved sentiment in the crypto market.

The last five to six months have been nothing short of a roller coaster ride for the cryptocurrency market. Due to the massive global uncertainties and fallout from FTX, the markets were hit harder. Let’s look at the market cap numbers over the last year, from November 2022 to February 2023:

Crypto market capitalization What should Indian investors do in the crypto rally?

The bullish momentum in cryptocurrencies could bring back not only retail investors, but also high net worth individuals, institutional investors, and corporations to grab some of the wild short-term trading gains.

While there is a rally in the crypto markets, it is important to follow simple rules and strategies to invest wisely, such as:

Diversify your portfolio and invest in a mix of investments. Spread your risk to mitigate the impact of a potential downturn in any specific crypto. Do your research (DYOR) and keep up to date with industry developments. Don’t make impulsive decisions or get carried away by the hype. Follow a disciplined investment model. Finally, security should be a top priority for investors, so store your crypto assets in secure wallets with proper safeguards and security measures in place.

Experts observe that crypto investors should continue to take a cautious approach as any new development in this space can lead to extreme situations.

According to the research team of one of India’s largest crypto exchanges, CoinDCX, “This time the narrative is different because it’s more macro-focused, project-driven, and such momentum can be handled like a bear market rally, so investors in such a narrative should keep exposure to the small-cap token limited and deploy the majority in fundamentally sound, day-to-day developed projects.

Raj Karkara, COO, Zebpay, advocates an education-focused approach, as it is important to regularly monitor the crypto market and stay up to date with technical news and analysis.

“It is imperative that investors fully understand the fundamentals of a crypto token before investing. There are several investment strategies that one can use during a rally, so that one can invest wisely. Karkara said.

Taxnodes CEO and Founder Avinash Shekhar advises Indian investors not to settle for word of mouth or popular stories, but rather spend time understanding the fundamentals of the crypto space.

“Investors should start with small amounts and gradually increase their exposure by making informed investment decisions rather than betting on speculation. As an asset class, cryptocurrencies are currently volatile. However, supported by innovation and supportive regulations, the true potential of the Web3 space will begin to materialize and cryptocurrencies as an asset class will mature,” Shekhar said.

Undoubtedly, the crypto markets seem to be recovering from the recent crash, but the feeling of “fear” persists in the crypto community. Experts are confident that sentiment is still mixed for the Indian crypto industry as they were too hopeful of getting a respite from the government’s tax rate, but the Union Budget 2023 announced on February 1, 2023 ignored any news. mention of tax relief to the sector.

In India, there is still ambiguity on the high taxes and on the regulatory framework, however, with the ease of macroeconomic conditions around the world, trading volumes on Indian exchanges are expected to increase from the lowest prices. Investors have been advised to continue trading with caution and vigilance as you never know if the crypto rally is here to stay or not.

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