The end of last year ended with questions like will crypto market soar, plummet, or tease investors? Will Bitcoin remain volatile? how regulation will play a more significant role? Which type of cryptocurrency will shine in the market this year? There were many predictions as analysts charted the future of cryptocurrency.
The start of this year resulted positively in the favour of the crypto market as prices for major cryptocurrencies escalated. As for now, the cryptocurrency market is up, indicating market participants’ expectations that inflation is eventually cooling after favorable economic data.
Technically, the crypto market is still relatively down from its all-time highs, whereas, Ether’s price appeared quite positive by rallying to almost a 3-week high at $1,253 in Jan.
As low volatility recorded for Bitcoin, some experts believe that prices are on the verge of returning but, the BTC’s range-bound price could possibly be providing a boost for altcoins.
3 major factors influencing the crypto market
Last year, High inflation was a major problem and the most recent ISM data may provide the Federal Reserve System numerous reasons to taper interest rate increase. Assuming that the inflation will level off, which is something that is somehow suggested by the ISM data. Hence, smaller hikes in subsequent months are expected only if inflation decreases.
Secondly, where Bitcoin and altcoins still have risk events that can impact the price, BTC futures are indicating traders switching from a real majority short to long. Furthermore, 78.99% of Investors and traders are long Bitcoin at a ratio of 3.76 in comparison to BTC shorts.
Now as the market is majority long, BTC volatility will remain low. Considering the reduced spot volume, BTC volatility surprisingly reached a 2.5-year low in January’s early days which actually indicates an upcoming price move.
If BTC’s volatility remains low, it will traders some confidence in Altcoins because of Bitcoin price consolidation. In other words, range-bound trading has now laid the groundwork for market-wide altcoin rallies. Now as Bitcoin price has been impacted by the continuous flow of negative news, today’s rally depicts a flash of bullish momentum.
Now as the U.S. dollar index has begun to show signs of cooling down. Recently, the U.S. dollar index (DXY) reached its highest level since 2002. Considering the perfect world, investors are expected to experience a retracting DXY to increase sentiment for risk assets like cryptocurrencies.
The emergence of Defi & ETF depicting the crypto prediction
Decentralized finance and decentralized autonomous organizations are considered emerging cryptocurrency developments which seem to be the highest growth areas of crypto. Defi targets to recreate traditional financial products without any middlemen, whereas DAOs are likely to be considered a new internet community. Defi services surpassed $200 billion in 2021 and 2022 demand is still expected to grow in 2023.
Another aspect that might impact the crypto market is the prediction that the first spot Bitcoin exchange-traded fund (ETF) in the United States is expected to be approved this year. This will enable investors to have direct exposure to the cryptocurrency itself. As the market is now huge and mature enough to support it, experts predict a Bitcoin Spot ETF will be approved.
Generally, crypto markets are likely to continue to witness price whipsaws and most crypto experts agree that there are going to be many volatile days ahead. Where the positive news of easing inflation is indicating short-term bumps in crypto prices, but the market’s reaction to the upcoming unemployment data and the CPI report will be the more realistic approach to predicting the direction the market chooses to take.