How long will the current growth of the crypto market last?

At the end of the New Year holidays, Bitcoin rose in price to a three-month high, exceeding $17.2 thousand at the moment. At the same time, several cryptocurrencies from the top twenty in terms of market capitalization showed an increase of about 20% or more.

Over the past week, there has also been an increase in several groups of cryptocurrencies united by a common “narrative”, as exemplified by staking pool tokens or blockchain project tokens related to developments in the field of artificial intelligence. Single large price jumps also took place in less capitalized coins, among which, for example, Gala (GALA) or Zilliqa (ZIL).

Experts interviewed by RBC-Crypto told what could have caused the rise in prices in the crypto market, what affects it and how long crypto assets will rise in price.

“Growth will be short-lived”

ENCRY Foundation co-founder Roman Nekrasov

Several factors played in favor of bitcoin. First, we are seeing the traditional Christmas rally, the growth of the crypto market during the Christmas holidays, which this year has shifted to the period after the new year due to the consequences of the FTX crash and the overall difficult macroeconomic situation.

Cryptocurrencies traditionally grow at Christmas, because on these holidays people give gifts (often cash), invest in some risky but attractive projects. This is such a tradition in the USA, someone will buy a new iPhone as a gift for their loved one, and someone will buy bitcoins.

Secondly, the US Department of Labor published data on a sharp increase in the number of jobs in the US in December. This means a reduction in the unemployment rate in the country, to 3.5%.

Together with the slowdown in wage growth, the decline in unemployment indicates a gradual recovery of the economy from the crisis. This means that at the next meeting, the Fed may not tighten its credit policy and not raise the key rate, or raise it not as radically as last year (I remind you that it happened there by 75 pp at a time). Against this background, the S&P 500 and Nasdaq indices rose, and the crypto market with the US stock market is still highly correlated.

Third, at the end of December, Fidelity Investments, a $4.2 trillion asset manager, filed trademark applications related to the metaverse, NFTs, digital real estate, and crypto trading. This also became a signal that large institutions, despite the crypto winter, still see the potential for growth in cryptocurrencies and are developing in this direction.

Unfortunately, the current growth will be short-lived and it is not worth waiting for the continuation of the bullish cycle and the end of the crypto winter. American financial regulators will once again begin to publish statistics reflecting the situation in the economy. And it remains difficult, although it is in a better condition than a year ago. Talk about regulating stablecoins will resume again, and they are the main tool for the liquidity of the crypto market. We all have to prepare for a very painful volatility that will be observed in the crypto market throughout the first half of 2023.

“Bitcoin will give hope to the bulls”

Head of the trading platform Cryptorg Andrey Podolyan

Bitcoin, in fact, continues to be in a flat, and the range of the corridor is quite narrow. While reviewing expectations for 2023, I was just talking about the fact that during the year, Bitcoin will give hope to the bulls, but in the end, the growth will not be confirmed, and the BTC price will bog down. The real activity will start closer to the halving.

As for the altcoins, which showed decent growth, it was mainly the growth provoked by the news background from the projects themselves. For example, burning coins from profits and the like. Coins often react to such news. But there were also cases of a sharp increase in the price of cryptocurrency, absolutely not confirmed by anything, that is, ordinary market manipulations.

The main thing for a trader is, as always, to observe moneymanagement: do not enter a trade if there is no confidence and a plan in case something goes wrong, and put “stops” (stop-loss).

“This is temporary”

Head of Analytical Department AMarkets Artem Deev

Bitcoin began to grow at the end of last week after the release of the next statistics for the United States (business activity is slowing down, wage growth is declining). This may force the regulator to act less harshly in relation to raising interest rates, which has become a reason for some optimism in the markets. But this phenomenon is temporary, because in order to dampen inflation, the Fed will still continue to raise rates, which will be negative for risky assets, primarily cryptocurrencies.

In addition, there is news that may indicate that the “domino effect” begins in the cryptocurrency market after the collapse of the FTX exchange. The United States intends to investigate the cooperation between Binance and American hedge funds. Prosecutors have ordered investment firms to hand over records of their relationship with Binance. Cryptocurrency corporation Genesis held a new round of cuts and fired 30% of employees. Crypto exchange Huobi is also cutting costs and laying off employees.

It is most likely that in the near future there will be a correction of bitcoin, which will again go down and reach $14-15 thousand. There are still no fundamental factors for the growth of digital coins. It is better for traders to consider not only current risks, but also the prospects for a global recession. In order not to lose a lot, it is better to wait out difficult times in protective assets, or reduce investments in the most unstable digital coins.


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