The fate of the crypto market is inextricably linked to the complex macroeconomic situation in the USA, particularly the monetary policies of the Federal Reserve (Fed). Ruslan Lienkha, the head of markets at fintech platform YouHodler, recently shared his analysis and forecast on the crypto sector in light of the current economic climate.
The US economy is currently facing challenges such as high dollar inflation and the lingering effects of the pandemic. While dollar inflation has fallen significantly since the beginning of the year, it is still too high. The Fed’s “quantitative tightening” phase, which involves reducing the size of its balance sheet, is expected to continue until the end of 2023. This means that the Fed does not expect any interest rate cuts until mid-2024.
These dynamics have important consequences for the crypto market. Lienkha believes that the crypto market, particularly Bitcoin, is likely to see strong price rises only in conjunction with the first rate cut, which is estimated to occur in June 2023. In the best-case scenario, Bitcoin could reach $35,000 to $40,000 by the end of 2023. In the worst-case scenario, it is unlikely to fall below $20,000, which is a key psychological resistance level.
The performance of the crypto sector in the next few months is also dependent on the Securities and Exchange Commission (SEC) and its upcoming decisions on a spot exchange-traded fund (ETF) for Bitcoin. While the SEC is expected to approve the first ETF in late 2023 or early 2024, the exact timeline is uncertain. The approval of a Bitcoin ETF could have a significant impact on the market.
In the medium term, the road ahead for the crypto market seems to have been mapped out. By mid-2024, the return of the bull market is expected with the overlap of the Fed’s monetary policies and Bitcoin’s fourth halving, which is scheduled for April. Despite uncertainties and potential downward phases in the short term, Lienkha remains optimistic about the future of the crypto market.
Overall, the crypto market is closely tied to the economic situation in the US, particularly the Fed’s monetary policies. Investors and stakeholders in the crypto market should closely monitor these factors to make informed decisions and navigate the evolving landscape of the crypto sector.