The groundwork for a new Bitcoin and cryptocurrency bull market has been slowly improving since the beginning of the year, and we saw it getting stronger in March.
So far this year, crypto investors have overcome many hurdles, notably the regional banking crisis in the US, a hostile regulatory environment that Washington is considering taking action in the wake of FTX's bankruptcy, and persistent inflation.
Although Bitcoin has a low correlation with stocks, it is still vulnerable to the macro economy, which is full of uncertainties.
Analysts Evaluate Bitcoin
Joe Orsini, macro strategist and author of the "Signal vs. Noise" blog, made statements on the subject. According to Orsini, the new bull market for cryptocurrencies started on January 13, when Bitcoin broke its 200-day moving average.
Wells Fargo stock analyst Jeff Cantwell said in a note Friday that the SEC's recent actions "have created more uncertainty for investors about the crypto sector."
Ram Ahluwalia, CEO of Lumida Wealth Management, said he expects unstable prices from now on. After FTX, the optimistic mood in crypto and the improvement in market expectations regarding FED policy "could be tactically in favor of the bulls," he said.
“But clarity and regulation will be at the core of a persistent sectoral bull market. We do not have a clear regulatory framework for crypto. Once that framework emerges, we may be closer to the beginning of a sustainable bull market.”
Juthica Chou, head of OTC options trading at Kraken, said the options market is still pricing in ongoing volatility expectations, which is mostly a good thing:
“Bitcoin needs to be volatile right now for it to grow in size and market cap. It's too early yet, with a market cap of around $500 billion, meaning it's not yet big enough to serve as a global form of money. For it to reach this level of maturity, volatility needs to be high, and once the market cap is high enough then you can expect volatility to drop.”
Conor Ryder, analyst at crypto data provider Kaiko, said that March's rally began with the banking crisis and the rediscovery of Bitcoin's benefits beyond speculation, but it was market illiquidity that drove its price up by the end of March:
“Liquidity for Bitcoin is at its lowest level in the last 10 months, which means there is less price support both up and down. Once a rally starts in a low liquidity environment, we can see larger price movements to the upside.
However, these upsides can easily be followed by major downside moves due to the lack of support below current prices, so traders should approach the markets with caution, at least until they see an improvement in crypto liquidity.”
Wells of Enclave Markets said that Bitcoin is heading towards a bull market, citing a more optimistic macroeconomic picture and greater adoption of crypto by firms like Fidelity and BlackRock.
*Not investment advice.