After the devastation of 2022, cryptocurrencies have snuck into the new year while licking their wounds. Although it has increased 5% to $871 billion since January 1, the total market value of all cryptocurrencies is still down more than 57% from this time last year.
 
Although it is restricted to a small range between $16,500 and $17,300, the price of bitcoin has increased by 4.3% since the beginning of 2023. According to Refinitiv Eikon statistics, the world’s largest cryptocurrency is strangely quiet, with its 7-day volatility falling to levels not seen since October 2018.
 
“It will be a year for the patient,” predicted Vetle Lunde, senior analyst at Arcane Research, “since we do not expect prices hitting former all-time highs in 2023.”
 
Crypto Compare statistics shows that cryptocurrency spot trading volumes are still very low despite falling by around 48% in December over the previous month to $544 billion, its lowest level since December 2019.
 
While decreased trading volumes are typical at the beginning of the year, Arcane Research claims that a “general exodus” of active retail investors has contributed to the crypto market’s lethargy.
 
However, following the 2022 bitcoin slaughter, muted sounds fairly nice to certain market participants.
 
Callie Cox, investment analyst at investing platform eToro, said: “I feel encouraged by the floor we’ve seen forming under bitcoin; it suggests there’s a lot of demand around $16,000 and $17,000 levels.”

So what happens now?

THE BULL’S TALE

Bollinger bands, a technical indicator that tracks price and volatility, have been getting closer together on bitcoin charts, according to Marcus Sotiriou, analyst at digital asset trader GlobalBlock.
 
The bands are the tightest they’ve been since July 2020, and he continued that such tightening typically comes before big swings to the upside for bitcoin.
 
“These low volatility periods rarely last long, and volatility compression periods have previously tended to be followed by sharp moves, even in stagnant markets,” he said.
 
Furthermore, according to Coinglass data, funding rates for perpetual bitcoin futures have been positive since December 19, indicating that traders are betting on price rises and will pay to keep their long positions open.

THE BEAR’S TALE

Cryptocurrencies, on the other hand, remain vulnerable to macroeconomic headwinds as concerns swirl around a slowing global economy.
 
“People have less disposable income to invest in what they perceive to be risky assets like crypto,” said GlobalBlock’s Sotiriou.
 
Economic uncertainty may cause investors to flee to the safety of the US dollar, which is inversely correlated to bitcoin, according to Dalvir Mandara, a quantitative researcher at MacroHive.
 
“The macro backdrop for crypto remains bearish,” Mandara added in a note on Thursday.
 
Meanwhile, crypto corporations are dealing with the fallout from Sam Bankman-FTX Fried’s exchange.
 
Some major corporations have begun to lay off employees in an effort to cut costs, while Silvergate Bank reported a $8 billion drop in crypto-related deposits, sending its shares down nearly 43%.

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