Jan. 10 (Reuters) – Bitcoin looks stable in 2023. But it’s only been a week.
Cryptocurrencies crept into the new year, licking their wounds from the carnage of 2022. The overall global cryptocurrency market capitalization has increased by 5% to $871 billion since January 1, but is still more than 57% lower than at this time last year.
Bitcoin itself has gained 4.3% since early 2023, though stuck in a tight range between $16,500 and $17,300. According to data from Refinitiv Eikon, the world’s largest cryptocurrency is incredibly toned down, with its 7-day volatility dropping to levels not seen since October 2018.
“This is going to be a patient year because we don’t expect prices to approach past highs in 2023,” said Vetle Lunde, senior analyst at Arcane Research.
CryptoCompare data showed that cryptocurrency spot trading volume remains similarly muted after declining about 48% in December from the previous month to $544 billion, the lowest level since December 2019.
While lower trade volumes are common around the turn of the year, apathy in the crypto market has been exacerbated by a “general exodus” of active retail investors, according to Arcane Research.
However, for some market players, subdued sounds pretty good after the 2022 bitcoin bloodbath.
“I feel encouraged by the bottom we have seen under bitcoin shows there is strong demand at around $16,000 and $17,000,” said Callie Cox, an investment analyst at the eToro investment platform.
So what’s happening now?
A BULL’S TALE
Marcus Sotiriou, an analyst at digital asset broker GlobalBlock, drew attention to the tightening Bollinger Bands – a technical indicator that tracks price and volatility – in bitcoin charts.
He added that the bands are the strongest since July 2020, and such a tightening has historically preceded aggressive moves in favor of bitcoin.
This possible scenario was replicated by Lunde of Arcane Research.
“These periods of low volatility rarely last long, and periods of volatility compression have usually been followed by sharp moves, even in stagnant markets,” he said.
Also, perpetual bitcoin futures funding rates have been positive since December 19, according to data from Coinglass, meaning traders are betting on price increases and will pay to keep their positions open long.
A BEAR’S TALE
Cryptocurrencies, on the other hand, remain at the mercy of macroeconomic adversity as fears swirl around a slowing global economy.
“The weaker economic outlook means people have less disposable income to invest in what they consider to be risky assets like cryptocurrencies,” said Sotiriou of GlobalBlock.
Economic uncertainty could cause investors to flee for the safety of the US dollar, which is inversely correlated to bitcoin, said Dalvir Mandara, a quantitative researcher at MacroHive.
“The macro background is still bearish for crypto,” Mandara added in a Thursday note.
Meanwhile, crypto corporations are facing the fallout of Sam Bankman-Fried’s FTX exchange.
Some large companies have started to lay off staff to cut costs, while Silvergate Bank (SI.N) has seen its cryptocurrency deposits fall by $8 billion, sending its shares down nearly 43%.
Lisa Pauline Mattackal’s report from Bengaluru; Editing by Pravin Char
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