New year, new luck in cryptocasino. In the middle of January 2023, the prices of Bitcoin, Ethereum and Co decided to go up again. After several crashes – US interest rate hike, Terra/LUNA and FTX – cryptoassets have collapsed by two-thirds and more. Some tokens like LUNA or FTT have faded into insignificance, but many others are now working their way back up step by step.
First of all, Bitcoin itself. The market leader, probably the only truly decentralized coin, has seen an increase of 38 percent since the beginning of the year – from 15,000 euros to almost 21,000 euros on Saturday morning. Ethereum, number two, has also risen by around 38% since the start of the year – and is now trading at just over 1,500 euros again. Solana (SOL; +150%), SHIBA INU (+52%), Cardano (ADA; +47%) and Polkadot (DOT; +43%) have also seen strong growth rates since the beginning of the year.
Compared to key stock indices that track the US economy and the technology industry, cryptoassets are performing significantly better in the new year. Here is the comparison with the Dow Jones, S&P500 and Nasdaq100:
It is exciting that crypto investors are again giving coins and tokens significantly more value than at the end of 2022, when the industry was just bathed in the FTX bankruptcy. But with Sam Bankman-Fried’s trial pending, there seems to be a sense that this phase is now over. Even the bankruptcy of Genesis, the trading subsidiary of crypto conglomerate Digital Currency Group, seems to have already been priced in – the news on Friday by no means shocked the markets, on the contrary, things clearly brightened up on Saturday evening.
A look at the mood barometer shows: Sentiment has moved out of the fear zone and towards neutral – a little more and crypto investors would clearly be back in the “greed zone” where investments are usually very bullish. Something similar can be seen on the ordinary stock markets, where the mood has clearly returned to the “greed” range.
But the crypto winter is not over
However, the recent hype may turn into a trap. The US-dominated tech industry, to which the price of cryptocurrencies has been strongly linked in recent years, is facing a tough earnings season. Harbingers of this are massive job cuts at Amazon, Microsoft, Alphabet/Google and Meta/Facebook, which suggest mixed numbers for the last quarter of 2022 (aka “Russian winter”). It may dampen the mood again in the coming weeks. The energy crisis and the war in Ukraine, as well as strained relations with the trade giant China, are still major problems for the economy.
The expected calmer efforts by central banks against inflation are seen as a ray of hope for the investment landscape. This is likely to have peaked in the US and EU, which is why the ECB and Fed may be more reluctant to make big rate hikes in the coming months. In the US, however, the policy rate is expected to be around 5 percent in the middle of the year, which naturally makes risky assets like tech and crypto unattractive to many investors.
That’s why well-known analyst Tony Ghinea warned on Twitter against a rather short excursion to the top. “The bigger the pump, the harder $BTC will come down,” he wrote. The pump likely comes from brisk trading in Asia, but there is no sign of a sustained trend. In such cases, traders often speak of a “dead cat bounce” — that is, an unsustainable recovery of a price after a big crash. The term comes from the saying: “Even a dead cat will jump if dropped from high enough!”
In this regard, it should be noted that the entire crypto industry continues to talk about crypto winter. The recent waves of resignations at Coinbase and Crypto.com show how industry giants see the further long-term development – namely quite badly.
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