February 11, 2023 – The price of Bitcoin (BTC) and the wider crypto market experienced a correction at the beginning of this week, giving back a portion of the gains from January. Although some traders expected a technical correction, the news of the enforcement against Kraken exchange by the SEC and the announcement that staking-as-service programs are unregulated securities was unexpected. The crypto market was sold-off on the news, leading to concerns that other exchanges like Coinbase will be forced to do the same.
However, the question remains, does this correction reflect a change in the trend of the bullish momentum seen throughout January or is it just a temporary blip? According to analysts at Delphi Digital, the crypto market is set for a “roller coaster ride in 2023.” Analysts Kevin Kelly and Jason Pagoulatos explain that the recent price action is due to “recent increases in global liquidity” that favor risk assets. But both agree that macroeconomic headwinds will continue to impact markets until at least the third quarter of 2023.
Despite the negative impact of this week’s news on crypto prices, there are several metrics that offer insight into the future of the crypto market. The US Dollar index has rebounded from its recent lows and its inverse correlation with Bitcoin price could provide insight into the market’s next move. Additionally, the bond market is signaling that the Fed’s policy may be too firm, and market participants are “playing chicken with the Fed trying to call their bluff.”
From a technical analysis perspective, Bitcoin’s price pullback was expected and a retest of underlying support in the $20,000 zone is not surprising after the 40%+ monthly rally in January. Based on historical data and fractal analysis, Delphi Digital analysts suggest that there is room for further upside for Bitcoin as “there isn’t a lot of overhead supply for BTC in the $24K – $28K range.”
Short-Term and Long-Term Outlook
While the short-term outlook is encouraging, the reality of certain CPI components remaining sticky and Powell’s statement of the need for further interest rate hikes due to the strength of the labor market should be taken into consideration. However, based on the analysis of several key metrics, analysts predict that the end of 2023 will be bullish for Bitcoin and the crypto market.