It’s April, and the Bitcoin price has been hovering around the ,000 level since Mar 23. That’s a roaring price rally after starting March at the ,500 handle. Bitcoin started off the new year trading at a measly ,000. The question for crypto investors and traders now is whether BTC is looking expensive at that price or poised for another leg upward over the next quarter or the remainder of the year. Two Quick Near-Term Price Factors One bullish hint is that the king crypto is now heading into a month with historically strong seasonal price gains. Over the past 10 years, BTC charted gains on six occasions during April with an average return above 17%, according to a review of the data. With the ever-tightening Bitcoin-stocks price correlation (more on that below),
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It’s April, and the Bitcoin price has been hovering around the $28,000 level since Mar 23. That’s a roaring price rally after starting March at the $23,500 handle. Bitcoin started off the new year trading at a measly $17,000.
The question for crypto investors and traders now is whether BTC is looking expensive at that price or poised for another leg upward over the next quarter or the remainder of the year.
Two Quick Near-Term Price Factors
One bullish hint is that the king crypto is now heading into a month with historically strong seasonal price gains. Over the past 10 years, BTC charted gains on six occasions during April with an average return above 17%, according to a review of the data.
With the ever-tightening Bitcoin-stocks price correlation (more on that below), April is all the more seasonably bullish. The S&P500 Index charted monthly gains of 2.6% (stout for the broad benchmark) in eight of the past 10 years’ Aprils.
A bearish near-term factor, however, that could dampen the April effect is the emergence of a major whale seller. That is the United States government moving to sell 41,000 seized bitcoins. All sold at today’s market prices, the whale-sized sale could lead to a $1.1B supply increase as a result.
Here are seven other key factors to consider in the Bitcoin price watch as markets move.
The Collapse of CeFi in 2022 Has Been Bullish for Bitcoin in 2023
While the spectacular collapse of CeFi (centralized finance) crypto firms in 2022 tanked prices for months, now it’s helping BTC. The bottom line is everything that happened last year proves Bitcoin’s fundamental thesis and value proposition all over again.
Now, investors are remembering, or the most recent round of new crypto investors are, however, astonishingly learning for the first time that: Bitcoin was about having a reliable, decentralized, transparent basis for a financial system. Building all these unreliable, centralized, and unaccountable products on top of it defeated the purpose.
Doing that results in the same weaknesses, vulnerabilities, threats, dangers, and risks that Bitcoin was originally launched in 2008 to solve for users of financial services.
When all was said and done, the crypto financial crisis of 2022 took down FTX Exchange, Alameda Research, Celsius Network, 3 Arrows Capital, and many others. It also dealt a devastating blow to Gemini Trust Company, Digital Currency Group, and others. But the robust market rally proved all of this was already priced into Bitcoin by January.
March’s Three Big Bank Runs
By the time a trio of tradfi banks with crypto exposure failed in March, the market loved it. While Silicon Valley Bank customers were lining up to get their deposits as regulators and buyers closed in on it, Bitcoin price shot up from the neighborhood of $20,500 to $25,700 in four days.
As a result of the market reevaluating the industry after CeFi crumpled, the failures of Silicon Valley Bank, Signature Bank, and Silvergate were rocket fuel for the price.
Interestingly, a banking panic was underway in Europe as the one was happening in the US. Writing from Madrid for El Pais, Alvaro Sanchez reports the bank runs emboldened the convictions of the most informed Bitcoin supporters:
“For crypto investors, the banking panic in the U.S. and Europe confirms their belief that, in the future, all financial intermediaries will be gone and there will be a decentralized system, in which everyone can move their money without the need for banks.”
Bitcoin Stock Market Correlation Stronger Than Ever
Bitcoin’s correlation with stocks increased over the course of 2022. The timing of the vicissitudes of the crypto industry synced up with macro market trends. Over periods that stocks rose in price, cryptocurrencies were more likely to rise in tandem. The same went for periods when stock prices fell. Cryptocurrencies were more likely to fall in tandem.
The only difference between the cryptocurrency exchange markets and the stock market from the chart’s perspective was that the crypto in your portfolio moved like the stocks but with leverage. That Bitcoin-NASDAQ stock prices correlation held on through the new year relief rally, consolidation period, and rally higher in March.
Furthermore, the increasing sensitivity of digital asset prices to tech stocks and macroeconomic data may be the fault of institutional investors.
“The recent increase in the correlation coefficient between the crypto asset market and the S&P 500 may reflect the increased participation of institutional investors.” – Reads a recent study.
But on balance, the correlation seems overwhelmingly bullish. While Bitcoin may lose some of that, if it gets all the institutional investors it can, then it goes to the moon, right? The pile in over the last year, by all these different new investors moving Bitcoin price like the NASDAQ, is a bullish portent.
Bitcoin Adoption Continues
With a few exceptions where it was outlawed, Bitcoin adoption grows apace across the globe in 2023. While many of Bitcoin’s early adopters are tech industry developers in first-world nations, many are also tech industry developers in developing nations leading the way for their people.
Bitcoin is also used by the web savvy in countries where the local currency is drastically devalued by state monetary policy. President Nayib Bukele of El Salvador is, meanwhile, in some ways opting to give up control over monetary power to the market to capitalize on his country and enrich his people.
Critics ridiculed Bukele’s government for pushing to officially make Bitcoin legal tender. But newspaper writers and bloggers in the U.S. aren’t the ones in a position of responsibility to the Salvadoreans.
As it turns out, El Salvador has recently repaid the first of two $800 million bonds. The BTC gambit is looking pretty good on the Central American nation’s finances this quarter.
BTC Fundamentals and Community Are Growing Bullish in 2023.
BTC fundamentals are running strong as we begin Q2 of the year. Bitcoin’s hash rate soared to another record high to finish quarter one. The hash rate on the network marked 350 million TH/s by the end of March. It is the measure of miner power securing the network.
Miners earn revenues from solving the latest hash problem first and claiming the block reward. They also earn revenues from fees to carry transaction orders to the rest of the network. The corpulent growth of the platform at this most fundamental level of its infrastructure is very bullish for the market price of BTC. Their revenue was also up in March.
These are some of the most well-informed participants in the market. Additionally, their business model is most exposed to the risks of downcycles in the crypto exchange market. Moreover, it is very profitably rewarded during market upcycles. More machines plugging in now is a fairly strong leading indicator of market expansion in the future.
Liquidity on exchanges remains low as well, with a strong holding sentiment apparent. Lower supplies, wide order spreads, and volatile price spikes are signs of a bullish market.
The BTC community is meanwhile more enthusiastic than ever about the development of the industry’s products. Lightning Network is scaling it up rapidly for everyday use and in microtransactions.
Institutional Investors Are Bullish Bitcoin in 2023
In the middle of the relief rally in February, SeekingAlpha reported that the Bitcoin price rally was mostly powered by institutional investors.
Institutional investor respondents to one boutique banking firm’s survey are less eager to invest on balance, but interest is still running strong. Brown Brothers Harriman & Co. recently reported that 48% of institutions surveyed plan to add crypto ETFs to their allocations in 2023.
In March, Fidelity Crypto opened Bitcoin and Ether trading to millions of retail investors. Furthermore, the financial services giant offered them commission-free on the app.
Meanwhile, Larry Fink, CEO of investment management behemoth BlackRock, made big overtures to crypto and blockchain in his annual letter to shareholders.
Regulatory Grappling Over Cryptocurrency is A Mix
The regulatory environment for crypto is such a mixed bag that it’s difficult to rate it as bullish or bearish. On the one hand, Bakkt recently received regulatory approval for a $155 million crypto deal.
On the other hand, Bittrex Global is shuttering operations in the U.S. because of the regulatory environment. U.S. legal actions taken by the government against Kraken, Coinbase, Ripple, and Binance have made competition here unfair, Bittrex says.
Somewhere in between those potential indicators of regulatory impact on the Bitcoin price is the fact that Coinbase stock has held up despite the regulatory crackdown on cryptocurrency.