The year 2023 is starting off better for Bitcoin and the broader crypto market than last year ended. Even though most crypto prices are still trading in a very depressed, narrow range, BTC is at least showing a year-to-date performance of 1.55% and Ethereum of 4.5%.
However, as QCP Capital writes in its latest market analysis, there are early signs that should caution crypto investors. While the gold price is currently performing extremely strongly, the trading firm raises the question of whether this will continue if the expected wave five of the USD rally takes place based on the Elliott wave theory.
According to the theory, the fifth wave is the final leg in the direction of the prevailing trend. And a resurgent USD could mean further price losses not only for gold but also Bitcoin and crypto. As QCP Capital elicits, it remains to be seen if this will impact the other alternative asset classes as well.
Currently, total liquidity in the market, as measured by M2 money supply annual growth, has shrunk to 0% for the first time in history. “Not to mention the liquidity within crypto itself which is an even smaller factor of that,” the firm states based on the following chart.
7/ And overall liquidity, measured by M2 YoY growth, has shrunk to 0% for the first time in history! Not to mention the liquidity within crypto itself which is an even smaller factor of that pic.twitter.com/grwcAdPLn6
— QCP Capital (@QCPCapital) January 4, 2023
Price Targets For Bitcoin And Ethereum
Nonetheless, Bitcoin and Ethereum are in somewhat of a catch-up rally at the beginning of the year, much like gold. Despite the mini-rally, BTC is still trading in an extremely tight falling wedge, with 18k as the key breakout level on the upside, according to the firm.
In the medium-term, $28,000 is looking more and more key – as the head and shoulders neckline, and 61.8% fibonacci retracement level of the $3,858 2020 low to $69,000 2021 high.
Bitcoin / USD, 1-day chart
According to QCP Capital, Ethereum “remains significantly more bullish than BTC,” though ETH is also trading in a consolidation pattern. Investors should keep an eye on the top of the triangle at $1,400 for now, before the key resistance zone between $1,700 and $2,000 could be targeted. On the downside, the company expects $1,000-$1,100 to be a very good support.
Ethereum / USD, 1-day chart
The Macro Outlook For 2023
Probably decisive for whether 2023 will be a continuation of 2022 will be the macro environment. QCP Capital believes that inflation in the US will fall significantly, but not enough to reach the Fed’s 2% target.
This will cause the Fed to delay cutting rates as long as possible, as Jerome Powell does not want to be the guy in charge who makes the same mistake as in the 1970-80s when there was a “double-dip inflation era.”
This will lead to the Fed developing a “blinkered” mentality toward the far better numbers and making another mistake by easing monetary policy too late. “In a sad twist of fate, they will again wait too long and have to go into overdrive again,” the firm claims and concludes:
We expect this could only come in Oct-Nov again this year, but remain open minded to markets bottoming sooner than that.
At press time, the BTC price stood at $16,847, seeing a slight gain of 0.59% in the last 24 hours.
Bitcoin price, 4-hour chart
Featured image from Pierre Porthiry-Peiobty / Unsplash, Charts from QCP Capital (Twitter) and TradingView.com