The year 2023 is off to a better start for Bitcoin and the broader crypto market than it ended last year. While most crypto prices still trade in a very depressed, narrow range, BTC shows at least a year-to-date performance of 1.55% and Ethereum of 4.5%.
However, as QCP Capital writes in its latest market analysis, there are early signs that should alert crypto investors. While the gold price is currently performing extremely strongly, the trading house raises the question of whether this will continue once the expected wave five of the USD rally takes place based on the Elliott wave theory.
According to the theory, the fifth wave is the last leg in the direction of the prevailing trend. And a rebounding USD could mean further price losses not only for gold, but also for Bitcoin and crypto. As QCP Capital elicits, it remains to be seen whether this will affect the other alternative asset classes as well.
Currently, total liquidity in the market, as measured by the annual growth of the money supply in M2, has shrunk to 0% for the first time in history. “Not to mention the liquidity within crypto itself, which is an even smaller factor of that,” the company states based on the following chart.
7/ And overall liquidity, as measured by annual M2 growth, has shrunk to 0% for the first time in history! Not to mention the liquidity within crypto itself, which is an even smaller factor of that pic.twitter.com/grwcAdPLn6
— QCP Capital (@QCPCapital) January 4, 2023
Price targets for Bitcoin and Ethereum
Nevertheless, Bitcoin and Ethereum are in somewhat of a catch-up rally at the start of the year, as is gold. Despite the mini-rally, BTC is still trading in an extremely tight descending wedge, with 18k as the main breakout level on the upside, the company said.
In the medium term, $28,000 is looking increasingly important – like the head and shoulders neckline and 61.8% fibonacci retracement level from the $3,858 2020 low to $69,000 2021 high.
According to QCP Capital, Ethereum remains “significantly more bullish than BTC” even though ETH is also trading in a consolidation pattern. Investors should keep an eye on the top of the triangle at $1,400 for now before attacking the main resistance zone between $1,700 and $2,000. On the downside, the company expects $1,000-$1,100 as very good support.
The macro outlook for 2023
Probably determining whether 2023 will be a continuation of 2022 will be the macro environment. QCP Capital believes that inflation in the US will fall significantly, but not enough to stop the Fed’s 2% target.
This will cause the Fed to delay rate cuts for as long as possible Jerome Powell don’t want to be the man in charge who makes the same mistake as in the 70’s-80’s when there was a “double inflation era”.
This will lead the Fed to develop a “blind” mindset to the much better numbers and make another mistake of easing monetary policy too late. “By a sad twist of fate, they will again wait too long and have to gain momentum again,” the company claims, concluding:
We don’t expect this to be until October-November again this year, but we remain open to the markets that bottom out earlier.
At the time of writing, the BTC price was at $16,847, up slightly from 0.59% in the past 24 hours.
Featured image from Pierre Porthiry-Peiobty / Unsplash, charts from QCP Capital (Twitter) and TradingView.com
