Bitcoin in 2023 - The Dawn of a New Bull Market or Another False Hope?

2023年的比特币——新的牛市黎明还是另一个虚假的希望？

Bitcoin vào năm 2023 - Cánh Cửa Cho Một Thị Trường Tăng Giá Mới hay Lại Là Một Hy Vọng Hão Huyền Khác?

In the world of cryptocurrencies, 2023 has been a year marked by renewed optimism and burgeoning hope. Bitcoin, the pioneering digital asset, has seen a remarkable resurgence, reigniting the enthusiasm of investors who have weathered the storms of previous bear markets. 
<figure><img src="https://blog-cms.maskex.com/assets/img/posts/1280X1280-1.PNG" alt="" /></figure>
Figure (1) = Bitcoin Historical Price Action With a substantial 50% price increase, Bitcoin's performance in 2023 seems to be a harbinger of a bright financial future for the cryptocurrency. However, seasoned investors are understandably cautious, as they recall the past false dawns that have followed long bear runs only to be subsequently eclipsed by further declines. Take, for instance, the price action of Bitcoin in 2019. Despite a promising recovery, the cryptocurrency eventually succumbed to the unforgiving gravity of bearish trends, leaving many investors disillusioned and questioning the long-term viability of digital assets. As we stand on the cusp of what could be a significant turning point in the world of cryptocurrencies, the question remains: Are we witnessing the dawn of a new bull market, or is this yet another ephemeral surge destined to falter in the face of market realities?
<h2> Historical Context</h2>
The history of Bitcoin is marked by cycles of meteoric ascents followed by precipitous declines, each of which has been spurred by various internal and external factors. In this section, we shall examine the three most notable bull and bear markets in the history of Bitcoin, as well as the innovations, market trends, and external factors that contributed to these fluctuations. 
<h3>1. 2013 - 2014: Rapid Adoption of Bitcoin and Emerging Market Interest </h3>
<div>During this period, Bitcoin experienced a significant surge in price, going from approximately $100 to $1,000 USD. This rapid ascent can be attributed to the growing recognition of Bitcoin as a viable alternative to traditional currencies, as well as its increasing acceptance by merchants and consumers alike. The excitement around this groundbreaking digital asset spurred investors to flock to the cryptocurrency market, fueling the bull run. Additionally, emerging markets showed a growing interest in cryptocurrencies as a hedge against unstable local currencies, further driving the demand for Bitcoin.</div>
 
<h3>2. 2017 - 2018: The Rise of ICOs, Altcoins, and the Mainstream Attention </h3>
In the next bull market, Bitcoin's price skyrocketed from $1,000 to $20,000 USD. This growth was primarily driven by the emergence of initial coin offerings (ICOs) and alternative cryptocurrencies (altcoins). The promise of revolutionary new blockchain applications and use cases inspired a frenzy of investment, as investors sought to capitalize on the potential of these nascent technologies. Concurrently, mainstream attention from media outlets and high-profile investors brought cryptocurrencies into the limelight, attracting a broader audience and increasing market demand. 
<h3>3. 2020 - 2021: The NFT, DeFi Boom, and the COVID-19 Pandemic </h3>
The most recent bull market saw Bitcoin's price soar from $5,000 to $60,000 USD. This time, the primary catalysts were non-fungible tokens (NFTs) and decentralized finance (DeFi) platforms. These innovative applications of blockchain technology captured the imagination of investors, who poured billions of dollars into the crypto market in search of the next big thing. 
Externally, the COVID-19 pandemic and the ensuing boom in the tech sector (e.g., NASDAQ growth) played a significant role in driving this bull run. As traditional financial markets grappled with uncertainty and unprecedented challenges, many investors turned to digital assets in search of opportunities for growth and diversification.
In conclusion, the historical context of Bitcoin's bull and bear markets demonstrates that periods of massive growth are often triggered by new innovations and use cases within the cryptocurrency market, as well as external factors that drive investors to seek alternative investments.
<h2>Key Drivers of Bitcoin's 2023 Price Increase</h2>
<ul><li>Easing Inflation Fears and Renewed Confidence in Traditional Markets </li></ul>
The fear of inflation that had gripped the market in recent years has significantly receded, instilling confidence in traditional markets and spurring investors to consider riskier assets like cryptocurrencies. The Federal Reserve's decision to raise interest rates from 0.25% in Q1 2022 to 5.00% in Q2 2023 has played a crucial role in curbing inflation. 
<figure><img src="https://blog-cms.maskex.com/assets/img/posts/output.png" alt="" /></figure>
Figure (2) = USA Federal Reserve Funding Rate Q1 2022 to Present 
 According to data from <a href="https://truflation.com/">Truflation</a>, the US inflation rate dropped from 12.07% (17th April 2022) to 4.28% (17th April 2023), a healthy decline of 7.79%. The reduced inflation rate has led to increased disposable income, and in turn, consumers are more likely to purchase products and services. This boost in spending encourages positive economic growth, further reinforcing investor confidence in traditional markets, and translating into an optimistic outlook for the cryptocurrency market. 
<ul><li>Ethereum's Paris Upgrade From Proof of Work to Proof of Stake </li></ul>
 The Paris upgrade on the Ethereum network marked a significant milestone in the blockchain space, as it transitioned from a Proof of Work (PoW) to a Proof of Stake (PoS) consensus mechanism. In conjunction with the Shanghai upgrade, the Ethereum network has experienced substantial improvements, which may potentially pave the way for new innovative products and applications in the cryptocurrency sphere. However, it is worth noting that the market has not yet witnessed any groundbreaking innovations, mainly due to the challenging year 2022, which saw the collapse of major cryptocurrency companies like LUNA, FTX and Celsius. 
<ul><li>Regulatory Changes and Ongoing Developments</li></ul>
 Recent regulatory updates from the United States indicate an ongoing effort to regulate the cryptocurrency market, but these efforts have not significantly impacted Bitcoin's 2023 price action. The SEC's crackdown on unregistered securities has led to some concerns, such as Kraken shutting down its staking service in the US after a $30 million settlement. However, regulatory changes have not yet been a driving factor in Bitcoin's price increase in 2023. With nation states focusing on the development and implementation of Central Bank Digital Currencies (CBDCs), the regulatory landscape remains murky. Nevertheless, it is clear that the easing of inflation fears, renewed confidence in traditional markets, and technological advancements within the blockchain space are the primary drivers of Bitcoin's price increase in 2023. 
<ul><li>Bull Market Catalysts and Threats</li></ul>
The projected primary catalyst of the next run will be the emergence of tokenized assets and the development of new financial products via decentralized finance (DeFi) platforms for these assets. The rise of tokenized assets as collateral in DeFi protocols, the creation of new liquidity pools, and the utilization of other DeFi elements may spur interest in the cryptocurrency market and drive new capital. This could potentially serve as an open gateway for cryptocurrencies from traditional finance, somewhat merging the two markets. The emergence of this new market is likely to attract interest from venture capital firms, high net-worth individuals, and fund managers. Retail interest in the new tokenized asset market is expected to drive the latter part of the bull market. Although, when evaluating the current state of play in the tokenized asset market, there are factors which suggest that stating the new bull run now would be jumping the gun. The first element which suggests this, is that the tokenized asset firms are not quite ready yet. This is in terms of setting up all of the necessary capital provisions and legal finalities for the creation of such products. This has occurred due to the market being torn-apart limb by limb in 2022, with all first in survival mode, and companies leveraged for fundraising having their wallets firmly closed. Positive developments within the tokenized asset market are projected to amalgamate around Q3 / Q4 2023. From a fundamental standpoint of the cryptocurrency market, it seems most likely that the bull market will resume in Q4 2023 / Q1 2024, rather than at the present moment. Another factor which suggests that the bull run is unlikely to be now are macroeconomic factors, which remain harsh. This is particularly true in Europe, where inflation remains high and growth is stagnant. Recent data from IHS Markit's purchasing managers' indices (PMIs) suggest a modest rebound in the global economy, driven by the services sector and supported by manufacturing growth. However, the sustainability of this recovery is uncertain and will be influenced by the actions of major central banks. Eurozone inflation remains persistent, with core inflation continuing to accelerate despite the European Central Bank's (ECB) tightening of monetary policy. One factor contributing to this inflation is the tight labor market, with low unemployment rates and relatively high job-vacancy rates. Further tightening of monetary policy by the ECB may be necessary to loosen the labor market and reduce inflation. In the United States, recent favorable economic data and evidence of a slowing decline in inflation have led investors to revise their inflation expectations. While bond investors still anticipate a return to favorable inflation levels, they now expect the process to take longer than previously predicted. This has implications for the Federal Reserve's actions, as more persistent inflation may require tighter and more prolonged monetary policy, increasing the likelihood of a recession. In summary, the potential catalysts for a new bull market in cryptocurrencies include the emergence of tokenized assets, the development of new financial products via DeFi platforms, and the convergence of traditional finance and cryptocurrencies. However, the global economic landscape remains uncertain due to persistent inflation, particularly in the Eurozone, and the potential for central banks to tighten monetary policy. These factors may impact the sustainability of any cryptocurrency bull market. 
<h2>Technical Analysis</h2>
When evaluating the long-term structure of the BTC / USD chart, we can see that the bullish structure has been broken. BTC for the first time in its history has fallen below the high of the previous bull-run, as displayed in the chart below. <figure><img src="https://maskexglobal.sg.larksuite.com/space/api/box/stream/download/asynccode/?code=YWViYWFiMGNmZGZkMTk3ZjY2NThhZjJjMTY0MWRkMDVfY29tc1V6MTduUDVyYzA1QURMV1JpTURRNjB2Q24xbzNfVG9rZW46SGNGY2JTY2pKbzRheE94bWZvamxkeDRCZ0pjXzE2ODM2MzExODk6MTY4MzYzNDc4OV9WNA" alt="" /></figure>
<figure><img src="https://blog-cms.maskex.com/assets/img/posts/output-1.png" alt="" /></figure>
 Figure (3) = BTC / USD Monthly Chart TA 
 This shows us that BTC is currently within a long term corrective wave. However, on the positive news, BTC has completed the first wave (worst part) of the overall corrective wave. What we are seeing at this present moment is a retracement before a continuation of the negative price action. This is apparent when we evaluate the BTC daily chart. On the daily chart below, we can see that BTC is currently within a bear flag structure. If we compare the bear flag structure, in order to break the long-term corrective wave which we are seeing, BTC would be required to positively break $42,000 USD, which is somewhat unfathomable considering external factors and that the market is still picking itself up from 2022. It is expected that in the short-term BTC will return to around 24,000 USD, with BTC having peaked during this (B) segment of the (A) (negative), (B) (positive), (C) (negative) wave. 
<figure><img src="https://blog-cms.maskex.com/assets/img/posts/output-2.png" alt="" /></figure>
Figure (4) = BTC Bear Flag 
 
When we evaluate the Fibonacci ratios from the pole of the bear flag, we can see that BTC has reached the 0.5 Fibonacci ratio, suggesting that the maximisation of positive ascendency has occurred, as displayed below. 
<figure><img src="https://blog-cms.maskex.com/assets/img/posts/output-3.png" alt="" /></figure>
Figure (5) = Fibonacci Ratios
 
From an indicator perspective, this scenario has never happened to BTC on a long-term scale. Thus, indicators on larger timescales should not be trusted, due to the lack of historical data. However, when we view the daily indicators, we can see that there are bearish divergences on the MACD and RSI, meanwhile the WAI is displaying a lack of strength. 
<figure><img src="https://blog-cms.maskex.com/assets/img/posts/output-4.png" alt="" /></figure>
Figure (6) = BTC Indicators 
 TA Conclusion
The TA very much matches the fundamental analysis, suggesting that the cryptocurrency market is currently within a bear trap. It seems highly likely that BTC will see negative price action over the coming months. However, we will not see 2022 all over again, rather we will see gradual price decline and what appears to be market stagnation. The conclusion from the technical analysis is that the cryptocurrency market has not resumed or started a new bull run, rather it is in the midst of a positive wave within a larger corrective wave.
<h3> Conclusion</h3>
In this article, we have explored the various factors and historical context that have contributed to the rise and fall of Bitcoin prices. From the early days of rapid adoption to the rise of ICOs and altcoins, and the more recent DeFi boom, each bull market has been driven by new innovations and use cases within the cryptocurrency market, as well as external factors that have prompted investors to seek alternative investments.
 In 2023, we witnessed a 50% price increase in Bitcoin, driven primarily by easing inflation fears, renewed confidence in traditional markets, and advancements within the blockchain space. However, there remains a degree of uncertainty and unpredictability within the crypto market. The potential catalysts for a new bull market include the emergence of tokenized assets, the development of new financial products via DeFi platforms, and the convergence of traditional finance and cryptocurrencies. However, the global economic landscape, with its persistent inflation and potential for central bank tightening, may impact the sustainability of any cryptocurrency bull market.
 When we evaluated the technical and fundamental analysis in conjunction with the fundamental analysis prior, we came to the conclusion that the cryptocurrency market is currently within a long-term corrective move, and within a short-term bear flag. Thus, it is highly likely that the cryptocurrency market will see negative movement over the coming months, with the new bull-run not underway. As we reflect on the current state of the market, it is crucial for investors to stay informed and make educated decisions when it comes to their investments. 
With the inherent unpredictability of the crypto market, the question remains: Has the new bull run started? And, what new cryptocurrency innovation do you believe will trigger the next bull run? Ultimately, the answers to these questions will unfold as we continue to navigate the ever-evolving landscape of cryptocurrencies and blockchain technology.

Oliver Page

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Bitcoin in 2023 - The Dawn of a New Bull Market or Another False Hope? | MaskEX Blog