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Trading desk QCP Capital recently published its 2023 cryptocurrency forecasts in its latest edition of Just Crypto. The company highlighted key moments from the past year, potential implications for the new year, and the future potential of digital assets and global markets.
The report points to 2022-to-date returns for global assets. The market has had its worst year of performance for benchmark assets such as Bitcoin, S&P 500 and Nasdaq 100.
Other than natural gas, other assets suffered their worst losses since the 1970s. Bitcoin (BTC) alone has seen him drop more than 70% from all-time highs, while Ethereum (ETH) posted his 72% loss. This negative performance was “a byproduct of the steepest rate hike cycle in recent history” by the US Federal Reserve (Fed).
Crypto Prediction: Things to Watch Out for
The Fed is likely to continue to put pressure on the market, according to QCP Capital’s crypto forecasts. Therefore, the Fed will raise interest rates and unwind the balance sheet.
Inflation has likely peaked at these levels, but QCP Capital believes the market will see “sticky” or sustained inflation. That means financial institutions will struggle to bring inflation down to target.
This scenario could worsen if commodity prices, such as oil, are pushed back above $100. This isn’t the first time the Fed has faced a similar scenario, according to a trading desk report.
In the 1970s, financial institutions raised interest rates to keep inflation down, but the indicator recovered as oil prices trended higher. A war between Ukraine and Russia could have similar consequences to the 1970s and act as fuel for inflation.
As a result, as long as inflation remains “sticky,” the potential for bitcoin and risk-on assets to rise may be tempered. Additionally, QCP Capital believes the Fed’s Federal Open Market Committee (FOMC) is unaware of the danger of rising inflation.
Therefore, financial institutions accept the crash of risky assets such as cryptocurrencies and ignore the pain of investors. QCP Capital said of what could be one of the essential items for cryptocurrency forecasting:
This will encourage us to accept a recession rather than risk a rebound in inflation, even if the spike in inflation is again due to a supply-side shock. In terms of recession potential, we are now above the 2020 Covid highs and fast approaching the levels of the 2008 GFC and his 2001 Dot.com.
Crypt’s Hope at the End of the Tunnel
A hasty Fed easing of monetary policy could be upside. Over the past few months, representatives of some financial institutions have hinted at this possibility.
If this faction succeeds, it could lead to a sharp recovery in global markets, including Bitcoin and other cryptocurrencies. The US dollar, represented by the DXY index, will continue to act as a direct obstacle for digital assets.
In terms of technical analysis, the DXY index has seen some losses over the past six weeks, but may recover from current levels. This price rally could push the dollar back to $120, hurting the risks of global currencies, stocks and assets. Dropping below these levels can trigger the opposite scenario.
At the time of this writing, Bitcoin (BTC) is trading at $16,600 with some sideways movement on the daily chart. Tradingview’s BTC/USDT chart.
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