Crypto-versed: looking back on a market-beating quarter
Crypto assets rebound on financial stability risks and bets of futures interest rate cuts.
In this week’s Crypto Verse, we look back at the last quarter for crypto markets, and home in on three trades to watch.
The crypto winter thaws
After a cold crypto winter in 2022, the value of crypto assets rebounded to begin 2023.
While the price appreciation wasn't as broad-based as the pandemic bull market, a near doubling of Bitcoin prices from its lows has meant crypto is one of the best-performing asset classes this year.
Bitcoin weekly chart
There are several factors behind this trend. The first is an improvement in confidence in the crypto industry following several high-profile collapses last year, including the notorious failure of FTX. More recently, however, Bitcoin prices have returned as a trade against traditional fiat currencies, along with a bet on a less aggressive monetary policy.
Bitcoin prices have returned as a trade against traditional fiat currencies, along with a bet on less aggressive monetary policy. Although it embroiled key crypto lenders, the ructions in the US banking system drove investors to seek out assets that may hedge against systemic issues in traditional finance.
The highs for Bitcoin, which were around $29,000, came following the failure of Silicon Valley Bank and the forced acquisition of Credit Suisseby UBS.
Related but separate to this is the expectations for far less aggressive policy from the US Federal Reserve.
After the events in the US financial system, market participants and the Fed itself expect greater downside risks to economic activity from softer credit growth. Markets are pricing in no further rate hikes and eventually rate cuts from the Fed this year.
Even more pertinently for an asset like Bitcoin, "real yields" - nominal yields minus market pricing of future inflation - have fallen, driving the price of a more volatile and non-yielding asset like Bitcoin higher.
Three cryptos to watch
-
Bitcoin
Bitcoin's price has risen 64% to begin the year, with price challenging resistance at around. Momentum is skewed to the upside with the weekly RSI above 50, with the next level of resistance above $29,000 just over $34,000. Support to the downside appears around $25,000.
Bitcoin weekly chart
-
Ether
The weekly RSI is also pointing higher for Ether as its price closes in on $2000. The short-term trend is to the upside, while support appears around the 100 and 200-week moving averages.
Ether weekly chart
-
Crypto 10 Index
The Crypto 10 Index is also moving higher, owing to the strength in Bitcoin and Ether. However, price action still appears range bound, perhaps indicating a lack of breadth in the rally in cryptos.
Crypto 10 Index weekly chart
The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.
Discover how to trade the markets
Learn how indices work – and discover the wide range of markets you can trade CFDs on – with IG Academy's free ’introducing the financial markets’ course.
Put learning into action
Try out what you’ve learned in this index strategy article risk-free in your demo account.
Ready to trade indices?
Put the lessons in this article to use in a live account – upgrading is quick and easy.
- Get fixed spreads from 1 point on the FTSE 100, 1.2 on the Germany 40, and 0.4 on the US 500
- Protect your capital with risk management tools
- Trade more 24-hour markets than any other provider
Inspired to trade?
Put your new knowledge into practice. Log in to your account now.
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
