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The cryptocurrency market has rebounded in recent weeks, with bitcoin and other digital assets almost recovering their losses since the collapse of the FTX cryptocurrency exchange. Now, many investors wonder whether this is the end of the bear market for crypto, or just a temporary resurgence.
To answer this question and shed more light on what crypto investors can expect in coming months, I’ve spoken to Alex Benfield and Juan Villaverde, crypto analysts at Weiss Ratings, an independent ratings agency. (I am a freelance contributor to Weiss Ratings.)
Both analysts agree that the crypto market is currently in a bottoming process, with a mixed year ahead. They expect to see volatility and a significant rally in the first half of the year, but a softer second half. They also believe that the current macro backdrop has been absorbed by the market and that investors are speculating that rate hikes and inflation will continue to come down.
“The end or bottom of a bear market is more of a process than a singular moment,” Benfield said. “The crypto market is showing signs that it’s begun that process. There will be ups and downs along the way, and 2023 is poised to be a somewhat mixed bag of a year.”
When asked about the current macro backdrop of high inflation, rising interest rates and recession risk, Benfield said “the market seems to have absorbed that news, and investors may be speculating that rate hikes are coming to an end in the near future and inflation will continue to come down.” He added that “investors have come to terms with the FTX collapse and fears of further contagion have diminished.”
In terms of what to expect from bitcoin and the crypto market this year, Benfield said that “even if this rally extends to higher levels, it will be followed by a significant pullback. This bottoming process will follow a ‘one step forward, half a step back’ type of pattern. We do expect crypto to close out the year higher than where it opened, but perhaps not much higher.”
Villaverde, meanwhile, expects volatility to be the norm for crypto markets in 2023. “Even though bitcoin may end the year roughly where it is today, we do expect to see a significant rally in the first half of the year. The second half of 2023 looks softer in our view,” he said.
I would love to hear your thoughts on the current state of the crypto market and what you expect for 2023. Do you agree with the analysts’ views? Do you think we’re truly seeing the end of the bear market or is this just a temporary resurgence? Share your thoughts and predictions in the comments below.