Macro crypto currency market outlook

Bitcoin’s run has been impressive in 2023 thus far. A 40% recovery in January has been followed up by an extension of the run in February and a consolidation of those gains. At the same time, the market has been unable to establish back above critical resistance in the form of the August 2022 high. We will need to see the market put in a weekly close back above $25,200 to truly strengthen the bullish outlook and suggest we are getting ready for that next big push to the topside. Until then, there is risk for a corrective decline and additional period of consolidation.

As we look back at performance in the month of February, we view price action as constructive overall. While both bitcoin and ether were unchanged on the month, the fact that gains were able to hold up in the aftermath of a rocketship January run is rather encouraging. Remember, bitcoin closed out January up 40%, and ether put in a very impressive +33% performance.

We also need to consider the fact that crypto assets managed to outperform most other major traditional assets in February. Currencies were broadly lower against the US Dollar, and US equities put in a bearish monthly close. This adds to the draw of taking on exposure to an asset class that continues to show promise when it comes to offering up an alternative portfolio diversification option.

We believe mostly all of the downside from the 2022 crypto fallout has been priced in, which has also helped to reinvigorate investor enthusiasm towards an emerging asset class that many believe to be grossly undervalued. Moreover, a lot of what has helped to drive outperformance in 2023 has been the ongoing wave of institutional adoption. In February alone, we saw many headlines around giants in traditional financial markets looking to take on or increase exposure to the space.

Looking ahead, as per our technical insights, it will be important for bitcoin to establish back above $25,200 to reaffirm bullish prospects. Until then, we do worry there could be downside risk over the short-term on account of global macro fundamentals. That is to say, any additional strain on global markets from a further hawkish repricing of Fed rate expectations will likely weigh on global risk assets and could in turn spillover into crypto.

On the other hand, should we see evidence in the weeks ahead of peak inflation, particularly in the United States, this could inspire a great deal of confidence in global risk assets, which would then likely translate to increased demand for crypto assets.

As far as crypto specific fundamentals go, it will be important to continue to monitor developments on the regulatory front and to watch to see how updates unfold with respect to upgrades to the technologies around both the Bitcoin and Ethereum blockchains.