January 18th, 2023 – The crypto market is continuing to consolidate, with low volatility following a price rally that took Bitcoin to $21k. If Bitcoin manages to rise for one more consecutive day, a 10-year record will be broken. Since November 2013, the price of the main cryptocurrency has not risen consecutively for more than 15 days. We believe this may happen, as we do not expect the market to fall in the coming days. After a few months disconnected from the US stock market, the crypto market seems to have returned to moving together.
In our view, this is explained by the dilution of the impact of the FTX collapse over time, and by the expectation of a slowdown in US interest rates in early February. Crypto and stocks are risk assets that respond to expectations of interest rates and inflation, hence the reason for both to move in the same direction, although crypto is more volatile, thus riskier. The specific risks of the crypto market at the moment, which could cause a short-term Bitcoin drop, remain related to the situation of the DCG group and the Silvergate bank.
For now, the DCG group has gained time with the recent BTC price rally, which reduced the discount of the GBTC. In parallel, the founder of the Tron protocol, Justin Sun, would be interested in spending $1bn to buy assets from DCG, which could save the group. Silvergate Bank has just reported a $1bn loss in the fourth quarter of 2022 but has indicated to its shareholders that the worst may be over. Therefore, we believe that an adverse event by the end of the month is unlikely.
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