Source: Igor Batrakov/Shutterstock.com
The mood in the financial world is still fragile. 2022 has been a difficult year for investors as markets have experienced unprecedented turbulence. Not only did equities take a major toll, but bond markets also fell sharply. With the exception of the US dollar, people have searched in vain for safe havens, and the dollar has been no place to go due to inflation not seen in decades, leaving a feeling of security.
The stock market year was shaped like never before by the monetary policy of central banks, which held the reins firmly in their hands. There now seems to be a bit more clarity on that front: the Federal Reserve will raise interest rates to at least 5% next year and the ECB will raise rates as well. Inflation is already falling in the United States and the euro zone, but central banks are determined to continue and interest rates are expected to remain high over the coming year until the specter of inflation is finally dissipated.
This should change the orientation. Financial markets are likely to shift their focus from monetary policy to economic data, and that is where we will ultimately see whether or not we will see a recession. 2023 should decide whether enough tribute has already been paid for the excesses of monetary policy and all the consequences of the corona pandemic, or whether we will really see a severe recession, as many fear.
What does this mean for Bitcoin?
Bitcoin and the rest of the crypto industry have grown in popularity over the past three years and are now part of the bigger picture of the financial world. However, the asset class is still far too small to be able to decouple from the financial markets, as the fundamental meaning and purpose of Bitcoin and Co as a decentralized and independent monetary and financial system actually suggests.
This means that the development of the financial markets will also determine the price development of the crypto sector for the time being. The starting point is therefore the same as for equities: if there is no recession or only a slight recession, then enough tribute should have been paid and we can see higher prices again in 2023. If we see a full-fledged recession, Bitcoin and stock markets should also continue to decline.
Does Bitcoin still follow its own rules of the game?
However, despite the strong correlation with the stock markets, Bitcoin still has its own rules of the game which have a significant impact on the price. Cryptocurrency has so far moved in price cycles that have occurred around so-called halvings. In a bitcoin halving, the bitcoin regeneration rate is halved per transaction block created.
So far there have been three halves which take place every 4 years. The next is scheduled for early summer 2024. So far, the cryptocurrency has found its bottom in the bearish phase of its price cycle each time halfway through the next halving. The next bull run has always been started the year before the next halving. That would be 2023. While no new all-time highs are to be expected if you look at the previous cyclical move – this was always reached after the halving – at least the start of a new uptrend would be in the charts. for 2023 given past price patterns.
Source: Alexander Mayer
(the blue bars in this graph represent the halvings that have taken place so far in 2012, 2016 and 2020, as well as the upcoming halving in 2024)
Bitcoin has lived entirely in a world of loose monetary policy and zero interest rates during its lifetime. If we are now entering a new phase of the financial world with higher interest rates, cryptocurrency has yet to prove itself in this new environment.
But if a possible recession turns out to be moderate – and the chances of that happening are not as bad as many experts claim – then it should be priced in very quickly in the financial markets or even already priced in and then more money should be earned again – regardless of the type, there is still a lot of waiting on the sidelines – flowing into risky assets like bitcoin.
The fundamental investment reasons driving Bitcoin’s long-term adoption also have their say here. Its strength as a deflationary asset may play a lesser role in a world of higher interest rates, but Bitcoin’s complete autonomy should still benefit long-term investors and businesses in these increasingly difficult times. more uncertain about geopolitics and social divisions in many countries. more targeted countries.
Above all, the extreme reliance on central banks, which firmly hold the reins of the economy due to their central position as controllers of the monetary system, has become very evident over the past three years – and many don’t like it. An alternative to this system is therefore likely to have become more attractive to many in the long run, both at the individual, company and country level.
In summary: If there is no worst-case scenario in 2023 and we go through a full-scale recession that will cause massive damage and could plunge us into a multi-year depressed economic phase, then there is no much to prevent Bitcoin from sustaining its price the cycle will follow and we will see the start of a new uptrend by the end of 2023 at the latest. We could see an economic recession in the United States and Europe in 2023, but the economy is still resilient. A phase like the 1930s, which is currently talked about in places in the market, cannot be identified – at least in my opinion – on the basis of previous economic data and the quarterly results of most companies.
The Halving 2024 will again halve Bitcoin’s supply and Bitcoin’s fundamental strengths will ensure gradual adaptation. This speaks of a further rise in Bitcoin prices and the rest of the crypto sector.
Think long term
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