Optimistic or skeptical of Bitcoin’s current rally?

Optimistic or skeptical of Bitcoin’s current rally?

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2023-01-31 13:07:42

The effect of the Chinese withdrawing money for Tet does not seem to have happened as in previous years’ history. Investors’ expectations were stronger when seeing the Bitcoin price “wake up” after a long hibernation of the past 6 months, followed by a series of other large and small tokens also increased slightly.

After a long period of silence, the total crypto market capitalization has increased by 21.6% since the beginning of the year to hit the $1 trillion mark. However, the positive price action in the first weeks is also just an indicator of the beginning of a bull cycle, it is not possible to confirm how long this wave will go.

Expectations and beliefs

Terra’s Luna and UST disaster in June 2022 led to a long-term Bitcoin price drop, along with a chain crash of many big names in the market. This greatly affects investor confidence in the resilience of the cryptocurrency market.

“It is important to understand volatility is likely to continue and the macro situation remains challenging. No market recovers easily in a V-shape.”commented Mike Novogratz, CEO of Galaxy Digital.

If 2022 is only full of fake prices, then 2023 may be another round of money pumping, similar to the “set traps” of sharks. However, there are still many other reasons this growth could happen and the crypto market could continue to move higher.

Lever is one of the reliable evidence bases for the above argument. After the fall from CeFi exchanges like FTX, the leverage used on CEX has dropped quite deeply. Perpetual futures (margin/futures) volumes are down more than 60% from their November 2021 peak (according to Coinglass). Along with that, Bitcoin, the leading crypto asset by capitalization, also has a price chart that matches the open volume of perpetual futures contracts.

Perpetual Futures Trading Volume and Bitcoin Price

DeFi investors are vulnerable to excessive leverage and other associated financial risks. Whales in the DeFi space aren’t like that, they usually don’t opt ​​to increase leverage, citing that only around $164 million (ETH) can be liquidated on lending protocols like Maker, Aave, Compound, Euler, and Liquity (data recorded by DeFilama).

Therefore, collapses from large investment funds, large exchanges such as FTX or external factors such as natural disasters and epidemics can create a strong liquidation wave.


Smart Money Stablecoin Holdings. Source: Nansen

At this time of price increase, it can be seen that there is still a lot of cash flow, most investors hold stablecoins instead of unstable coins (BTC, ETH, BNB,…). According to figures reported from Nansen, the percentage of whales’ portfolios is largely cash, estimated at around 25%. This number is recorded to have decreased from the peak of 40% after the FTX crash.

The data above shows that investors still have plenty of room to push prices higher. To date, stablecoins have dropped 4.2% from $142.4 billion to $136.4 billion, which shows that some liquidity has “left” the ecosystem, but it appears that the remaining capitalization in crypto is not. small number, according to Nansen.

The impact of macro factors in the cryptocurrency market

Political and economic factors are having more or less impact on crypto see more (here). The Fed’s rate hike is expected to counter the worst inflation we’ve seen in decades, helping crypto investors limit their impact.

Inflation has shown signs of deceleration and tends to cool down further. This led the Fed to slow down the rate hike from 0.75% to 0.5% at the FOMC meeting in December. This may lead some investors to believe that the market is approaching the final stage of interest rate hikes, even a pause or a rate cut.

The view of the Fed is one of the factors that turn and change financial markets, from foreign currencies, bonds, gold and cryptocurrencies, all of which have increased in early 2023. So any action. Any easing of financial conditions also plays a positive role for cryptocurrencies. Crypto is inherently quite sensitive to liquidity in the vast financial system out there, money flow and big decisions are the core factors that shape this fluctuation.

According to data from Fundera, Bitcoin has been accepted by more than 15,000 businesses as a form of payment since October 2022 and this number is constantly growing. This is considered a good signal for the price of Bitcoin in the future.

Bitcoin price predictions and market recovery

During the bear market of 2022, the Net Unrealized Profit/Loss (NUPL – Indicator of Net Unrealized Profit/Loss) on Glassnode recorded a decrease along with the Bitcoin price. The two deepest declines occurred in June and August and moved into the negative zone in the next 5 months. This time, Bitcoin also bottomed out at $15,476 (November 21, 2022).


Unrealized Net Profit/Loss indicator. Source: Glassnode

In 2023, the NUPL index is signaled to have a better performance. In the long-term chart of NUPL and BTC, the indicator is returning to the positive zone. This sign usually shows that the bearish season is ending.

Historically, in 2015 and 2019, the NUPL’s return to an orange value correlated with the end of the accumulation period. At that time, the index rose to the positive zone, and returned to the blue and green growth zone shortly after.

The identification was even clearer when Bitcoin’s resistance level of $21,500 was broken, the price fluctuated and rallied towards the $23,000 mark after a long period of deep decline. With indicators and many market analysts seeing similarities, expectations are even greater in the current cycle.

Based on many premises and investor assumptions, Bitcoin is predicted to increase in price in this new cycle. However, how long the accumulation phase of the cryptocurrency market will last remains an age-old question.

According to electronic exchange Changelly, Bitcoin will grow gradually at present and reach a peak of 38,000 USD in 2023. Besides, based on technical analysis, this cryptocurrency exchange estimates that the Bitcoin price is likely to hit the $100,000 mark by 2026.

There are even other opinions that Bitcoin can surpass 1,000,000 USD in 2026 and maybe even more.

The conversation between Mr. Michael Saylor (founder and CEO of MicroStrategy) and a representative of CNBC.

Along with that, many proposed analytical methods support the above argument of Michael Saylor, typically the stock-to-flow model also predicts the BTC price to reach $ 1 million by 2026 (according to CryptoWatch).


The stock-to-flow model

Speaking to CNBC, Antoniv Trenchev, the founder of cryptocurrency company Nexo, said that based on market data, we can completely believe that Bitcoin will one day reach the price milestone as people expect. wait.

Sharing the same opinion, Mr. Anthony Scaramucci, founder of SkyBridge Capital shared that there is quite a bit of expectation on Bitcoin. He expects 2023 to be Bitcoin’s “recovery year”, and also predicts that the highest-cap cryptocurrency will likely reach $50,000 to $100,000 within the next 2-3 years.

However, contrary to all of the above arguments, Meltem Demorors, Chief Strategy Officer at CoinShares predicts that Bitcoin is likely to rise and only peak in the $25,000 to $30,000 price range in 2023.

“Bitcoin’s upside potential is quite low because there isn’t a lot of new capital coming in”Ms. Meltem Demirors shared.

Overall, experts say, the change in the macroeconomic situation can help Bitcoin in particular and the crypto market in general. Viewed from an objective point of view“In the context of political and macroeconomic instability, inflation continued to increase. So, everyone will be looking to allocate assets next year, maybe crypto will be the right choice in their portfolio.”Ms. Demirors added.

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