Key Risk Events in 2023 and Impact on Bitcoin and Crypto Markets

In the world of finance, Bitcoin (BTC), Ethereum (ETH) and the crypto market have shown impressive resilience amid a cross-asset sell-off, outperforming the Nasdaq, gold and 2-year returns.

Still, there are concerns about whether this resilience is sustainable and whether BTC is following in the footsteps of Wile E Coyote, who runs off a cliff without realizing it until he looks down.

Global and Crypto Market Outlook

In a recent market report, QC Capital confirmed that BTC is still catching up with the massive Q4 2022 – Q1 2023 rally in other markets. As a result, expressing views through a long USD or short Gold position may be preferable, as the crypto is expected to remain more resilient on the downside.

On the two other occasions when returns and risk assets diverged in March and July 2022, other assets rallied quickly. Still, yields have moved exponentially since this month’s NFP and CPI. And they are expected to take a breather from today’s highs.

For the breach to happen, it will require next month’s set of NFP, CPI and FOMC to back up this move. Currently, the global market and the crypto market are already pricing in a higher rate for 2023 than the Fed’s dots. This means that it will take another strong set of data to increase the median to start the next stage lower for risk assets.

Until then, BTC will probably be in a range waiting for the next signal.

The risk of possible reversal of liquidity

The driving force behind BTC’s divergence is that it is the most direct global liquidity proxy. It is not tied to any central bank or nation, QC Capital confirmed. While the focus has been on USD liquidity, there has been a missed massive injection of liquidity from the Bank of Japan (BOJ) and the People’s Bank of China (PBOC) over the past three months.

Central banks have net added $1 trillion in liquidity since the market bottom in October 2022. PBOC and BOJ ranked as the biggest contributors. Therefore, such a large supply of liquidity will find its way to the crypto market. Even despite what appear to be the current US administration’s best efforts to prevent it.

Apart from US data and Fed guidance, one also needs to be aware of BOJ and PBOC liquidity injections. Any reversal of liquidity from these two sources will remove the underlying support that Bitcoin has seen over the past month. Therefore, the next two BOJ meetings will mark the transition of BOJ governors for the first time in 10 years, which will take on additional significance for crypto traders.

In addition, one must watch China’s CPI over the next few months – not as a market mover, but as a sign of when the PBOC will be forced to slow its stimulus. Risk is tilted to the downside, as BOJ and PBOC liquidity injections need to slow down in Q2. Meanwhile, the Fed’s QT continues at full throttle, with the possibility of an even higher Fed terminal rate.

Bitcoin (BTC) Price Prediction: Signs of a Double Top

On the technical side, QC Capital argues that Bitcoin is potentially forming a double top towards the August 2022 correction high and the May 2022 reaction at 25,300.

Above that is the huge resistance at the $28,800-$30,000 Head and Shoulders neckline. Until these levels break, the 5 wave count remains valid, with a final wave 5 lower to come. Bitcoin momentum continues to be stronger than Ethereum, as seen from momentum indicators such as MACD.

Ethereum (ETH) Price Prediction: The Battle Continues

Ethereum is still struggling to break the support-turned-resistance level of $1700-$2030. While it remains below, the final Wave 5 count is still valid.

A short entry on Ethereum would be a crossover on the weekly MACD line. Possibly to sell the news after the Shanghai merger.

Potential for a rough 2023

In terms of upcoming risk events in 2023, several important events could affect the global and crypto markets. These include the US debt ceiling, the Federal Reserve’s balance sheet reduction and potential tapering or tightening by central banks around the world. These events could contribute to a potential correction of the crypto market. It is important to be vigilant and stay informed about developments.

Although Bitcoin has shown impressive resilience amid a cross-asset selloff, concerns about sustainability remain. While liquidity injections from central banks have driven the market, any reversal of liquidity could affect BTC’s performance.