Cryptocurrencies jumped into the new year with an impressive monthlong rally. Bitcoin is trading near four-month highs after jumping above $22,300 on Friday. The top crypto surpassed its level prior to the collapse of the FTX exchange in November. And its 14 days of consecutive gains as of Wednesday marked its longest winning streak since 2017. But some analysts warn the price of Bitcoin could halve before retesting highs in the second half of 2023.
The Recent BTC Boom
Global macro fundamentals around views for a Federal Reserve pivot, China's reopening and an upgraded outlook for the Eurozone economy all factors into the early 2023 Bitcoin run, according to Joel Kruger, market strategist at LMAX Group. The London-based financial services provider specializes in foreign exchange markets and cryptocurrency.
"On the crypto side, we believe longer-term players have been looking to build exposure at perceived discounted prices," Kruger said. "These players are betting that most of the downside from the crypto implosions of 2022 are now fully priced in."
CrowdStrike Initiated At Outperform Amid Microsoft Cybersecurity Battle
Last year saw a wave of bankruptcies from crypto firms as prices plummeted from all-time highs in late 2021. The spring collapse of Terra Labs' LUNA token and sister stablecoin TerraUSD was the first crypto-domino to fall, wiping out $60 billion in market value. That led to the bankruptcies of crypto firms including Three Arrows Capital, Voyager Digital and Celsius Network.
FTX Group was the final major implosion to round out the year. The second-largest exchange by volume, FTX filed for bankruptcy after overleveraging and mishandling billions in customer funds with its sister firm Alameda Research. Another, BlockFi, filed for bankruptcy shortly after. Bitcoin and cryptocurrencies traded near two-year lows in the months following the meltdown.
A more sustainable recovery will require deeper institutional adoption and regulatory clarity, Kruger says. "While we have seen great strides in this direction, we believe there's still more room to close this gap," he said.
Bitcoin Price Outlook
But Kruger warns the world's largest cryptocurrency isn't quite in the clear yet. "The January price surge has perhaps run a little too far and fast, as per technical indicators showing a severe overextension," he said. He believes additional upside should be limited for now to allow for a period of consolidation and correction.
"Fundamentally, global markets are still looking quite fragile and assurances of a Fed pivot could very well be overstated," Krueger said. As for crypto, he says the outlook is still "a little rocky." And speculation around the type and level of regulatory response could cause more short-term turbulence.
"We still wouldn't rule out the possibility for a deeper setback down toward $10,000 in the first half of the year," Kruger said. But additional Bitcoin setbacks below the $10,000 level "should be limited" ahead of the next big topside run.
This could lead to a strong Bitcoin recovery in the second half of the year, where it recovers above $50,000 and is "in a position to retest and break the record high," he said.
Bitcoin price jumped above $22,300 on Friday to trade at its highest level since September. Bitcoin is up roughly 32% over the past month after hovering in the $17,000 range following the collapse of FTX in early November.
Crypto Stock Action
Crypto stocks have also surged with the recent rally. Publicly-traded exchange Coinbase jumped 11.6% on Friday after sliding 1.5% on Thursday. COIN stock spiked 55% the past month. Still, shares are down 17% over the last three months and 71% over the past year. Shares of Bitcoin miner Marathon Digital rose 10% on Friday and have catapulted 123% the past month. But MARA stock is down 31% over the last three months and 63% for the past year. Similarly, CleanSpark is up 34% for the month but down 9.5% the last three months and 59% over the past year. CLSK stock climbed 6% Friday.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
