Macro crypto currency market outlook

Bitcoin has been showing signs of life in recent weeks, with the price breaking out of a multiweek consolidation and pushing to fresh yearly highs. The recent breakout above the February high ends that consolidation and opens the door for the next major upside extension towards resistance in the $53,000 area. All of this price action suggests we could be finally seeing the formation of the next major higher low ahead of a bullish continuation that takes us back towards and through the record high from November 2021. At this stage, any setbacks should be well supported ahead of $40,000.

March was a good month for cryptocurrencies. Ether led the way, up some 30%, while bitcoin wasn’t far behind, up about 25% on the month. We believe a lot of this had to do with a variety factors including global macro themes and crypto specific developments. As per our technical insights, the bullish price action was important as it translated to a break of a consolidation in the price of bitcoin and ether that we had been seeing in 2022. Both bitcoin and ether had been capped by their respective February highs against the US Dollar, and both managed to finally push through those levels in March.

On the macro front, investor risk appetite was quite healthy in March, despite uncertainty around the war between Russia and the Ukraine. As fears of worst case scenarios were priced out, investors became less concerned about the spillover effect into the global economy, focusing their attention on reassurances from central bankers that all would be well despite surging inflation and the need to normalize monetary policy more aggressively. And as things stand right now, given that cryptocurrencies are still considered to be an emerging asset class, the moves in stocks and global sentiment were correlating to movement in crypto.

Of course there were other positive developments as well, these coming from crypto specific headlines. On the regulatory front, we heard about a more crypto friendly White House executive order, Janet Yellen recognizing the benefits of innovation in the space, and an EU vote that rejected an anti proof of work clause in a crypto bill. On the adoption front, we heard more stories about banks getting involved, and more stories about many traditional names pushing forward with their crypto business models.

Goldman Sachs made headlines for its first over-the-counter crypto options trade, reflecting a further expansion of digital asset offerings to Wall Street investors. And our own LMAX Group announced a partnership with SIX to launch cash settled, centrally cleared crypto asset futures. The launch is expected in Q3 2022, pending regulatory approval, and will initially include centrally cleared USD settled Bitcoin and Ethereum futures, trading 23 hours, five days a week, with the full product roll out to be extended to 24/7 trading.

As we look to the months ahead, we retain an optimistic outlook, but a cautiously optimistic outlook. Price action has indeed been constructive and the fundamentals have also been quite favorable. Moreover, seasonality is on the side of crypto as well. Looking at historical performance, April and May have proven to be very strong months for crypto. At the same time, we hold that level of caution when considering all of the downside risks in the global economy. Fallout from the war and COVID are still risks that need to be considered, and the impact of tighter monetary policy on risk assets should not be discounted.