Bitcoin ends Feb flattish, past risks seem mitigated
Bitcoin ended February flattish after going up ~40% in January.
March 1, 2023 - Bitcoin ended February flattish after going up ~40% in January. During the month, prices reached US$25k, but retreated to the mid-US$23k level. Macro data didn’t help with stubborn US inflation, on top of regulatory crackdown on the industry. March is historically a negative month for Bitcoin, but there is no fundamental explanation for such performance. If the Fed increases the interest rate by 50 bps instead of 25 bps in the next FOMC meeting on March 22, this month could repeat its historical performance, in our view.
The risks that were looming in the crypto industry in late 2022 and early 2023 seem to be under control, for now. As the price recovers, Bitcoin miners are getting some relief from the financial distress, which started with the Terra-Luna collapse in May/2022, peaking with FTX in Nov/2022. In an irony of fate, or not, Wintermute’s researcher, Igor Igamberdiev, believes that one of the wallets linked to the Terra-Luna dollar stablecoin (UST) depeg could be tied to trading firm Jane Street, former employer of SBF. As time goes by, more details from the events of 2022 will certainly be revealed. Meanwhile, we think that the risks related to the past year’s crypto firms collapses are becoming less concerning.
Other risks that were a concern a few months ago also seem to be mitigated, with the DCG group being able to keep afloat after the bankruptcy of its lender and trading subsidiary Genesis. The company reported US$1.1bn losses in 2022 according to its earnings release, pointing out the problems it faced last year. We see the crypto market overcoming negative narratives once again, which could be an illustration of how we will remember the current concerns about macro and regulatory uncertainties.
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