The ‘crypto winter’ seems to be thawing, with the Bitcoin market breaking above $21,000 on Friday for the first time since November.
Industry insiders are cautiously optimistic about a further uptick in the market, reading last week’s trading trends as early signs of a bull run, amid signs of cooling of inflation.
“The crypto market is witnessing a series of positive developments such as the UAE issuing federal-level regulations, FTX recovering customer funds and improvement of macroeconomic conditions, as a result of which the crypto market is moving north with signs of sustained momentum,” Dhruvil Shah, senior vice president – technology at Liminal, a Singapore-based digital wallet infrastructure platform with operations in the UAE, told Arabian Business.
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“It will be interesting to see if investors with a high-risk appetite will make a move on the early signs of a bull run as the crypto market is inching toward the $1 trillion mark led by Bitcoin and Ethereum,” Shah said.
Bitcoin price rally
The crypto market started 2023 on a highly positive note with Bitcoin breaching the $17,000 mark last Monday, January 9, and sustained the upward trajectory throughout the week.
Friday’s Bitcoin trading is estimated to be approximately $22 billion, a jump of 40 percent from the previous day.
Industry experts predicted the crypto market will undergo a correction phase this year, which will weed out the weaker players from the market and shift the focus to a more decentralised framework for better security of user funds.
“The macroeconomic factors surrounding the financial markets may not change drastically but we can expect a gradual recovery from the prolonged crypto winter of 2022,” Shah said.
The latest US jobs reports revealed the unemployment rate has gone down significantly and is reversed to pre-covid levels.
The US inflation figure also slowed to 6.5 percent in December from 7.1 percent the previous month.
The latest data set is perceived as a macro boost which resulted in a surge in US and European stocks, along with the crypto market.
Most of the crypto assets witnessed mini-rally due to the positive investor sentiment driven by favourable macroeconomic factors.
“The Bitcoin price rally demonstrates that cryptocurrency investors are pricing in more favourable market conditions in 2023 as inflation looks set to peak,” a senior executive at a Mumbai-based crypto venture said.
Bitcoin touched $21,095 on January 13 for the first time since November 8, 2022.
Industry analysts said as the central banks begin to stop tightening the screws, and the cyclical upturn gets underway, the asset classes such as cryptocurrencies that have fallen hardest in 2022 are expected to outperform others.
“These asset classes may be the strongest performers during the unwinding of the rate hike programmes,” the executive at the Mumbai-based crypto venture said.
Shah also foresees Web3 emerging as a leading force in 2023 with strong backing from venture capitals (VCs).
“In 2022, VCs invested more than $30 billion into crypto and blockchain startups and this number is expected to create a new benchmark this year. We remain optimistic that the crypto industry will thrive if nurtured by a healthy regulatory environment with a business-friendly tax regime,” Shah said.
Bitcoin lost over 60 percent of its value in 2022, with many other tokens experiencing similar losses, due to the bleak macro outlook, the collapse of several crypto firms, and greater regulatory scrutiny.
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