Over the course of 2022, crypto prices continued to fall after the ATHs that were set in late 2021, and it seems that sellers may have been successfully exhausted, with a relatively high likelihood that the price has now bottomed out.
The halvening is not yet priced in, which is bullish for crypto prices
The Bitcoin halvening is one of the most important aspects of crypto cycles, and dominates the fluctuations in prices, since the potential selling pressure from miners is cut in half every four years.
Historically, the price has fluctuated wildly after Bitcoin halvenings, as the inflation rate is cut in half and the asset becomes far scarcer in terms of stock to flow.
There are many who believe that the upcoming halvening in 2024 has not yet been adequately priced in, and many would reasonably expect the price to rise in advance of the halvening in order to factor in the decline in selling pressure.
Disbelief .. "this is a bull trap" pic.twitter.com/TjeUBPMlfS
— PlanB (@100trillionUSD) January 17, 2023
The US dollar index continues to decline, pushing crypto prices
The US dollar index has continued to fall in significance over the course of the last few months, and may continue to fall.
According to a recent report by Coindesk, Bitcoin and Ether have a strong inverse correlation with the DXY, and a weakening dollar could thus signal a lot of positivity for the crypto space.
It remains to be seen how the DYX will continue to perform over the rest of 2023, but Powell has been public that he is determined to keep interest rates high until inflation is fully back under control – no matter what the ramifications of this decision may be.
However, Jerome Powell may be forced to pivot soon
The high interest environment that we currently find ourselves in has meant that risk on assets have been significantly depressed, and the stock market has been suffering and declining as a consequence.
These decisions were taken in order to mitigate the effects of inflation, which were expected to be far more disastrous in the longer term than the effects on a recession in the short term.
However, it seems that many analysts are now calling for a Fed pivot, given that inflation now appears to have peaked and to be declining somewhat.
Unemployment is once more rising, and the Federal Reserve’s decision to balance the economy between a situation of low unemployment and low inflation appears to be tilting in a favourable direction for asset allocators.
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