In Q1 2023, the crypto market is recovering from the bear market, US regulators' Operation Choke Point 2.0 to crack down on crypto, US SEC lawsuits against Binance, Coinbase and other crypto firms for violating securities laws, and traditional firms' Bitcoin ETF applications. witnessed the return of institutional investors. Will the upward trend continue after these events or are there big headwinds coming in Q2 2023?
Crypto market outlook in 2023
US GDP grew by 2 percent in the first quarter, well above the forecast of 1.3 percent. US Federal Reserve Chairman Jerome Powell, the European Central Bank and the Bank of England announced at the annual ECB Forum event that central banks will continue to raise interest rates in the 2023 H2 period. In his statement on Thursday, Powell reiterated that there will be two more interest rate increases this year.
The market expects the US Core PCE inflation data, which is the Federal Reserve's preferred indicator to measure inflation, to be 4.7 percent. CME FedWatch indicates an 87 percent probability of a 25 basis point increase in July, which will cause the US Federal Reserve to continue increasing interest rates in the second quarter. The restructuring of the US Treasury General Account and the US dollar will also affect crypto prices in the second half, with the US dollar index (DXY) rising above 103 again in two weeks.
Analysts and Bloomberg analysts; Bitcoin is bullish on the price reaching $40,000 in July or early August as traditional financial firms such as BlackRock, Fidelity and Invesco file for a spot Bitcoin ETF. However, Bloomberg analyst Mike McGlone points to major headwinds for Bitcoin price in the coming quarter due to the high probability of a recession in the US, central banks raising interest rates and other macro reasons. Meanwhile, coin traders are preparing for the $7 billion Bitcoin and Ethereum expiry today, June 30, which is one of the largest and has caused huge fluctuations in the crypto market.
Bitcoin, Ethereum and altcoins will rally!
Many are predicting a return of the bull market in H2 2023 due to the Bitcoin ETF, $199 million in institutional inflows almost a year later, and U.S. dollar liquidity remaining satisfactory despite the U.S. Treasury Department's bond issuance.
Since mid-June, stablecoin reserves on major exchanges have recovered significantly, bringing a rebound in coin holdings such as BTC and ETH. Additionally, crypto regulatory efforts have resulted in greater liquidity concentration in established coin assets such as Bitcoin and Ethereum, which could cause Bitcoin and Ethereum to enter a “technical bull market” sooner.
Moreover, Bitcoin accounts for 50 percent of the crypto market cap and altcoins are under pressure. However, the expected decline in BTC market value in 2023 H2 could bring a sharp movement in altcoins.
