2022 hasn’t been the best year for Bitcoin. Indeed, some investors are bound to say it’s been one of the worst in quite a while. Since its emergence on the financial market in 2009, Bitcoin has gone through surges and falls, much like any other cryptocurrency that has followed its model to launch. However, BTC has always been associated with a higher level of stability compared to altcoins. Bitcoin also has a higher level of liquidity, given that virtually any established crypto exchange hosts it. Given the high volume of trades that occur daily, Bitcoin maintains its high liquidity compared to other digital assets.
In 2022, however, the price of BTC plummeted a great deal, ending up just shy of $17,000. The coin lost well over 60% of its initial value, a change that scared many investors. The response was mixed, with some choosing to sell their coins and tokens before they could lose more capital, while others are certain that Bitcoin is guaranteed to bounce back sooner or later. Then, on January 15th, it happened. The BTC price has reached a neutral level of 52, the highest since the beginning of April 2022. However, this move didn’t occur out of the blue and has arrived in light of a steady gain of 24% for Bitcoin over the past week. The Fear & Greed Index, created to gauge stock movements and whether they are reasonably priced or not, has also reached a more neutral territory after many months of fear.
So, what can investors expect over the course of 2023? Will this tendency hold, or is it just a temporary surge?
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The progress
In June 2022, the market sentiment hit a multi-year low of nine. Following this change, it has constantly been hovering in the 20 to 30 range, the well-known designation for the “extreme fear” category. The longest-ever streak of extreme fear in Bitcoin occurred in mid-2022, so it’s natural that investors were more than a little worried about the changes occurring on the Bitcoin blockchain.
The Fear & Greed index uses motions from different media sources to create figures. The aspects used include current volatility levels, as well as volume, market momentum and data gathered from Google trends. Since Bitcoin is a highly speculative asset and a lot of the hype around it relates to the emotional landscape surrounding the market, these numbers are crucial. The index holds five categories ranging from extreme fear to extreme greed. The latter, however, wasn’t recorded since October 2021.
Currently, the index has returned to values of 45, still in the fear category, but a more moderate fear than in the past. This shows that while confidence hasn’t yet made a total return for traders, the path is leading towards it. And to add to the good news, 2023 has brought BTC its second-longest streak of gains in all of its history. Since the beginning of this year, the asset has gained no less than 28%, wiping out previous losses. BTC was mainly marred by the collapse of FTX back in November 2022.
The momentum has created a movement in technical indicators, such as a new high level of the relative strength index, the most elevated in the last four years. However, a high RSI rate can also signify that an asset is overbought and there’s a need for prompt correction.
Altcoins
The Bitcoin surge isn’t only good for itself. Since BTC is the blueprint for other cryptocurrencies, much of the digital asset market revolves around it. This means that anything positive that happens for Bitcoin is likely to reverberate towards other cryptocurrencies. Analysts expect this will be the case in 2023 as well, as altcoins are expected to gain renewed strength and maybe even have their big breakout over the course of this year.
Litecoin is perhaps the most popular choice for researchers. On January 12th, shortly before Bitcoin experienced its surge, LTC broke its overhead resistance, which could be an indicator of a new uptrend. Some estimate that the price will soon exceed the $100 mark. OKB has also started a new uptrend, leading investors to make a run to buy the dips by maintaining an adequate stop loss. This belief aligns with the idea that a new lower price represents a momentary bargain and that the asset is undoubtedly bound to increase its value over time.
Fantom is another currency that saw a steep increase this January. However, its breakout was followed by a rally that moved the RSI into overbought territory. A pullback occurred since vertical rallies are unsustainable in the long run. If the bulls succeed in resuming the recovery, the price could approach $0.42 soon. However, if the bullish impulse doesn’t hold, predictions see the price dipping to $0.28 or below.
Liquidations
The surge has also had a definitive effect on liquidations, with a rate of $500M, the highest over the past three months. It is the first time since crypto markets have regained the $1 trillion market capitalization levels since November 2022. These figures signify that over 70% of investors have recorded losses as leveraged positions closed due to the evaporation of the initial margins. Several notable exchanges have recorded significant losses.
However, major cyber coins have increased by roughly 20% since last week. As such, many investors don’t consider previous movements to have been performed wholly irrationally and in a spur-of-the-moment type of way. The underlying tokens registered positive fundamentals, a plus in the trading handbook. Stronger transactional activity has also contributed to renewed interest in native tokens.
While it’s still too early to tell definitively, it might be that cryptocurrency will escape its darker days in 2023. Researchers are still apprehensive about making any definitive judgements, as the Bitcoin surge might be the case of a dead cat bounce, a temporary recovery that will be met by a substantial fall. Investors can only hope that the momentum will continue. However, since any guesses about the market are likely to be thoroughly unsubstantiated, and nobody knows exactly how the coins will behave, it’s better to remain cautious.
