Broadly positive expectations for the global economy, including the widely praised reopening of China's economy, may provide a positive boost to markets as energy prices are slowing around the world.
The crypto market has suffered again after lender Genesis, a subsidiary of Digital Currency Group, filed for bankruptcy on the premise that it owes more than $3.4 billion to its creditors. Seems like another violation crypto market infrastructure carry that may bring it to the brink of another recession.
A recent rally in risk assets after crowd sentiment spiked extremely positive is slowly coming to a halt. The US stock market is slowing down ahead of the January 31-February 1 Federal Reserve (Fed) meeting as the monetary watchdog appears to show the market no mercy as it continues to insist on a further monetary tightening to address high inflation.
Digital assets have also gained some traction in recent weeks as bitcoin prices have risen 38.2% since the beginning of this year. But the major currency is showing a slowdown with some signs of reversal to the downside. Coinshares reported that the digital asset recorded to the tune of $37 million in inflows during the third week of January 2023. These inflows, however, would hardly help the market move higher as inflows were mostly seen in Europe at $24 million. , cryptocurrencies related to BTC. assets at $5.7 million, and ETH-related crypto assets at $4.2 million. More than 95% of the inflows to the United States, or $25.5 million, went into short Bitcoin products. This is a clearly bearish signal that may drag down the major digital currency next week after the Fed continues its tightening amid still aggressive rhetoric.
The European Central Bank (ECB) continues to follow the Fed by raising interest rates at a faster than expected pace. ECB Governing Council member Olli Rehn said he sees ground for significant interest rate hikes this spring, while ECB Governing Council member Klaas Knot said two hikes are expected to be decided. interest rate hike of 0.5% during the next two meetings in February and March, with a possible continuation of interest rate hikes in May and June.
The cryptocurrency market seems averse to large bankruptcies and is therefore primarily focused on major cryptocurrency trades. The risk of bankruptcies is seen to be controversially high this year, so market players are mainly exercising a hit-and-run strategy. Also, retail investors are quite disappointed after the collapse of the fourth largest cryptocurrency exchange FXT which created an $8 billion hole in the pockets of its clients.
However, there is some light at the end of the tunnel in the form of optimism about the European economy. German Bundesbank President Joachim Nagel has suggested that the ECB could bring inflation down to the 2% target by late 2024 or early 2025, without a recession. Analysts polled by Consensus Economics say the eurozone is likely to avoid a recession this year with growth of less than 0.1% in 2023. This positive consensus came after Germany, Europe's most powerful economic engine, performed better than than expected in the fourth quarter of 2022 and avoided falling into contraction.
Broadly positive expectations for the global economy, including the widely praised reopening of China's economy, may provide a positive boost to markets as energy prices are slowing around the world, including Europe. The most important factor is that the second major source of inflation, food prices, is also slowing. Therefore, there is a strong possibility that the global economy will continue to expand despite the slowdown in the manufacturing industry, driven by improving exports around the world. This can also be good news for the world of cryptocurrencies, since Bitcoin prices may survive above $17,000 per coin for the nearest future at least. This can drive bitcoin prices down into a tight range with a top margin of $21,000 per coin.
Regardless, the Fed's statements on February 1 are likely to drive markets for risky assets, including cryptocurrencies, and may put pressure on current prices, dragging Bitcoin towards the support of $17,000 per coin.
Disclaimer: The opinions and views expressed in this article are solely those of the author and are not necessarily shared by Coinspeaker. We recommend that you do the necessary research on your own before any investment and trading moves.
Ivรกn is the Head of the Analytical Department of meter.
