The cryptocurrency market remained range-bound before the holidays, with lower overall volumes

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  • BTC ranged in a sideways range between $16,800 and $17,000, while ether was trading at about $1,200.
  • Elon Musk said that we could be in a “recession” in 2023, like the one that happened after the Global Financial Crisis in 2007 and 2008.
  • Despite a slowdown in consumer spending, it is still strong because more people are spending money on services. Additionally, third-quarter spending was higher than the monthly average after accounting for inflation.
  • The Fed could also be forced to keep or even raise its median terminal rate for a long time to deal with the strong job market.
  • The five-year breakeven inflation rate has significantly decreased to 2.29%.
  • One of the major players in the space, Core Scientific (CORZ), which generates about 10% of the Bitcoin hash-rate, filed for bankruptcy. 

Last week’s volatility in cryptocurrency prices was fairly low. Although there has been a soap opera surrounding Sam Bankman-arrest, Fried’s extradition, and an unbelievably shrinking $250 million bond, it appears that crypto assets are ignoring the commotion and trading on the basis of fundamentals, sentiment, and standard supply and demand.

Markets can now turn their attention to elements that are more closely related to valuations, which is good news. The decline in trading volume is one aspect that stands out, which is reasonable given the season. Last week, there was a significantly smaller range of performance, with winners and losers ranging from 6% to -3% as opposed to 30% to -15% the week before. The momentum for bitcoin and ether is still largely inactive and range-bound. The decrease in volume, which is typical of year-end trading, makes this situation worse.

LTC experienced relatively better returns compared to the majority of other cryptocurrencies. Considering that a number of other projects experienced a more severe decline in the value of their assets than Litecoin. But over the previous seven days, LTC’s performance improved by more than 5%.

Source: Tradingview

We are, however, operating in a different market environment than what we have become accustomed to over the past ten years due to inflation remaining stubbornly high. Therefore, in order to deal with the strong labor market, the Fed might also be forced to hold or even increase its median terminal rate. The bright side of significantly lower medium-term inflation expectations, though, may still increase growth investors’ faith in a mid-term recovery. It’s a significant development, confirming that the October lows are the absolute lows if Bitcoin can maintain its consolidation without re-testing those lows. Although it’s still too early to say, the market action is positive.

Bitcoin exchange withdrawals have fallen

Data indicates that Bitcoin exchange users have moved on from the FTX scandal this holiday season. According to data from the Cryptoquant platform, exchange outflows have reached their lowest point in over six months. BTC withdrawals from exchange wallets have completely reversed the spike that began approximately six weeks ago, following a massive increase in the wake of the FTX crash. After reaching a peak of over 140,000 BTC on November 14, outflows have decreased by more than tenfold. Total exchange outflows amounted to roughly 9,000 BTC, a decrease of more than 90%. This can be slightly good news for the bulls.

Source: Cryptoquant

On-chain data is currently showing record low volatility as hodlers are hesitant or don’t need to move many coins. With a lifespan of one week to one month, unspent transaction outputs (UTXOs) have reached their lowest levels in 15 months.

Concluding Thoughts:

The crypto miner industry has been suffering from a months-long “crypto winter,” with the cost of mining Bitcoin exceeding its current price. Investors do not need to be so pessimistic as we celebrate Christmas and welcome 2023. It is difficult to predict where Bitcoin or other cryptocurrencies will be at the end of 2023, but we will make an educated guess for entertainment purposes. Remember that the market is forward-looking, and we may have bottomed/near-bottomed despite a recession in 2023. In general, we believe that as soon as news of a Fed interest rate cut begins to circulate, it will become one of the primary triggers that can lead to a significant increase in investment interest not only in cryptocurrencies but also in equities. If the Fed’s rhetoric does not soften in the next two quarters, the Bitcoin price may oscillate between $13,000 and $19,500 in early 2023. The end of the Russian-Ukraine war would be positive for the market and would almost certainly result in a rally. China’s actions to open up its economy may be more beneficial to the global economy than anticipated, assisting us to avoid a recession.

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