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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

Crypto-versed: looking back on a market-beating quarter

Crypto assets rebound on financial stability risks and bets of futures interest rate cuts.

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In this week’s Crypto Verse, we look back at the last quarter for crypto markets, and home in on three trades to watch.

The crypto winter thaws

After a cold crypto winter in 2022, the value of crypto assets rebounded to begin 2023.

While the price appreciation wasn't as broad-based as the pandemic bull market, a near doubling of Bitcoin prices from its lows has meant crypto is one of the best-performing asset classes this year.

Bitcoin weekly chart

Source: IG

There are several factors behind this trend. The first is an improvement in confidence in the crypto industry following several high-profile collapses last year, including the notorious failure of FTX. More recently, however, Bitcoin prices have returned as a trade against traditional fiat currencies, along with a bet on a less aggressive monetary policy.

Bitcoin prices have returned as a trade against traditional fiat currencies, along with a bet on less aggressive monetary policy. Although it embroiled key crypto lenders, the ructions in the US banking system drove investors to seek out assets that may hedge against systemic issues in traditional finance.

The highs for Bitcoin, which were around $29,000, came following the failure of Silicon Valley Bank and the forced acquisition of Credit Suisseby UBS.

Related but separate to this is the expectations for far less aggressive policy from the US Federal Reserve.

After the events in the US financial system, market participants and the Fed itself expect greater downside risks to economic activity from softer credit growth. Markets are pricing in no further rate hikes and eventually rate cuts from the Fed this year.

Source: CME Group

Even more pertinently for an asset like Bitcoin, "real yields" - nominal yields minus market pricing of future inflation - have fallen, driving the price of a more volatile and non-yielding asset like Bitcoin higher.

Source: St Louis Fed

Three cryptos to watch

  • Bitcoin

Bitcoin's price has risen 64% to begin the year, with price challenging resistance at around. Momentum is skewed to the upside with the weekly RSI above 50, with the next level of resistance above $29,000 just over $34,000. Support to the downside appears around $25,000.

Bitcoin weekly chart

Source: IG
  • Ether

The weekly RSI is also pointing higher for Ether as its price closes in on $2000. The short-term trend is to the upside, while support appears around the 100 and 200-week moving averages.

Ether weekly chart

Source: IG
  • Crypto 10 Index

The Crypto 10 Index is also moving higher, owing to the strength in Bitcoin and Ether. However, price action still appears range bound, perhaps indicating a lack of breadth in the rally in cryptos.

Crypto 10 Index weekly chart

Source: IG

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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