• Bitcoin looked remarkably stable Wednesday, trading around $16,780 as traders wrestled with the uncertain market outlook for next year.
• U.S. equities were a bit more buoyant on Wednesday, with the Nasdaq Composite, Dow Jones Industrial Average, and S&P 500 all up 1.4-1.5%.
• Traders have been navigating the continuing nervousness on the potential market contagion from the FTX collapse over the past month and closely watching the U.S. Federal Reserve’s hawkish stance on possibly continuing to raise interest rates in 2023.
The cryptocurrency market was surprisingly steady on Wednesday, with Bitcoin (BTC) trading around the $16,780 mark. Investors seemed to be wrestling with the uncertain market outlook for the coming year, with many wary of the potential impacts of the recent FTX collapse.
The largest cryptocurrency by market capitalization has been hovering in a range of between $16,700 and $16,900 over the past 24 hours. This stability was not mirrored in the traditional stock markets, however, as the tech-heavy Nasdaq Composite, Dow Jones Industrial Average, and S&P 500 all experienced a boost, trading up 1.4-1.5%.
The Federal Reserve’s hawkish stance on potentially continuing to raise interest rates in 2023 is making traders nervous, and could be a major factor in the coming year’s markets. Thomas Kralow, a crypto trader, commented that the probability of a recession is high, and that people could see the same situation that played out in 2008, when the Fed pivoted too late and the market crashed by 40%. He noted that the market bottomed when the fed funds rate was at zero, worrying that this could mean a drop to $10,000 or lower for Bitcoin in 2023.
Alex Tapscott, the managing director of the digital asset group at Ninepoint Partners, compared the current market environment to December 2018, when Bitcoin (BTC) hit a then-all-time low of $3,000. He said the current situation looks to be the same, and that Bitcoin’s performance in the coming year will depend on how the traditional markets perform, as well as the Fed’s response.
As the markets move forward, traders will be keeping a close eye on the potential impacts of the FTX collapse, the actions of the Federal Reserve, and the performance of traditional stock markets. With all of these factors in play, Bitcoin’s price and stability could be drastically affected in the coming year.