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  • Crypto Week: Macroeconomics is Primarily Driving the Crypto Market

Crypto Week: Macroeconomics is Primarily Driving the Crypto Market

Bitcoin prices are trying to breakthrough the upper margin of the divergent wedge to post new one-year highs. This is happening without any fundamental drivers that would justify these efforts. So, a downside correction to $20,000 per coin is very possible. Some “experts” are trying to convince the crowd that some unknown large investors are seeking safe haven in the crypto market. There are no explanations as to who they are or why they chose to place their funds in the riskiest market.

More experienced traders may be prone to see the recent market rally as having a rather speculative nature. Some funds received by the infamous 3AC founders from the sovereign wealth of the Kingdom of Bahrain are now involved in the operation via the OTC platform. And this seems to be alarming on the thin market, as these founders may manage the funds in the same usual unwise manner that they did during 3AC management.

The U.S. Dollar is seen to be strong despite some turbulence in the U.S. banking sector. Federal Reserve (Fed) officials are reiterating that no U-Turn in the monetary tightening in 2023 should be expected. This is starting to be accepted by the market crowd as investors now expect the Fed fund rates to be lowered by 50 basis points by the end of 2023, while a month ago most of the crowd expected rates to be lowered by 100 basis points by the end of this year.

The World Bank’s negative outlook on the global economy, with decreasing growth rates in the Q2 2023 amid rising fuel prices and contracting borrowing activity, contributed to a risk-off sentiment. In other words, the American currency is far from being defeated and could recover its losses, which would put additional pressure on risky assets. It is unlikely to expect the crypto market capitalisation to rise dramatically on this background.

The French central bank is looking to tighten crypto market regulations with a focus on DeFi. The same intensions have been expressed by the U.S. Finance Ministry with an angle to money laundering by DeFi entities. Thus, we may expect an addition wave of regulatory initiatives towards the crypto industry, which would hardly support the prices of crypto assets.