Crypto-versed: looking back on a market-beating quarter
Crypto assets rebound on financial stability risks and bets of futures interest rate cuts.
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
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.
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.
Three cryptos to watch
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
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
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
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