Find out what 2023 holds for Bitcoin and Crypto
Both inside and outside of the cryptosphere, 2022 was a memorable year. The events of the past 12 months seem to have spanned five years. Despite everything that was going on, the major patterns for 2022 were already apparent in January. With several deceptive bear-market rallies, the slide in cryptoasset values that began in November 2021 continued throughout 2022. We think that the key macro factors that impacted the traditional and crypto markets in 2022 will continue to do so in 2023. The two most crucial areas to pay attention to are to get more profit.
Stay defensive while the Fed is tightening, consider a more aggressive approach when the Fed begins loosening. The US Federal Reserve (Fed) & Recession What is tightening and loosening? Why should you focus on the Fed and recession? Let’s get into that below.
“Don’t fight the Fed”
The current monetary policy of the Fed is referred to as tightening and relaxing. The Fed has been actively tightening financial conditions since March 2022.
1. Tightening – The Fed is making it more difficult to borrow money, which is slowing down economic growth. "Quantitative tightening" and "rising interest rates" are buzzwords.
2. Loosening – By easing borrowing requirements, the Fed is promoting economic growth. "Decreasing interest rates" and "quantitative easing" are key phrases.
Historically, it has been wise to be optimistic on risk assets when the Fed is easing monetary policy. Equities, commodities, high-yield bonds, real estate, money, and cryptocurrencies are all considered risk assets. It was time to be pessimistic on risk assets when the Fed started to tighten.
Many people spent 2022 waiting for the Federal Reserve to switch from a tightening to a loosening stance, also known as the "Fed pivot." The pivot did not take place. The risk asset bulls who believed the Fed would change course lost a lot of money. It is safer to simply wait for the Fed to take action rather than predicting what it will do.
When the Fed begins to operate in ways that are described on TV or in the media as "lowering interest rates" or "implementing quantitative easing (QE)," it might be an indication that the Fed is lifting financial constraints.
It may be a hint that the Fed is loosening financial conditions when it begins to take moves like "dropping interest rates" or "implementing quantitative easing (QE)," as reported on TV or in the media. If you want to predict what the Fed will do, you need pay attention to the factors that it weighs when making decisions.
Spotting the Fed pivot
The Fed has a dual mission, which is another way of saying that it is concerned with two things: stable prices and the maximum amount of sustainable employment. The Federal Reserve's first mandate, stable prices, in its war against inflation, served as the basis for its monetary policy decisions in 2022. The rate of inflation has slightly decreased, but it is still much higher than the Fed's planned target rate of 2% at between 7 and 6 percent right now. While it seems improbable that inflation will meet the Fed's 2% objective, it will probably continue to fall during 2023. Without a major drop in inflation, it is unlikely that the Fed will change course.
The Fed's second mandate, employment, will be the only other issue that will likely lead it to alter its trajectory. Because employment is directly correlated with overall economic activity, rising unemployment may result from a slowing economy. A prospective recession is currently being signaled by several economic indicators, such as dropping sales across numerous industries. Unemployment rates almost always rise during recessions, which may lead the Fed to relax financial regulations.
The long term view
Nearly every market in 2022 will be under stress due to the economy. Fortunately, the cryptocurrency market is just starting to climb the adoption s-curve. Cryptoassets such as Bitcoin and Ethereum are likely to see explosive adoption in the coming decades. Looking back, this decline will be but a blip in the rearview mirror.
The 2023 playbook of Bitcoin & Crypto
Focus on the Fed and the recession in the near term. Remember that the cryptocurrency market is in a great position relative to practically every other market over the long term. Leaders in the industry, such as Bitcoin, are only now beginning to offer web3 experiences that will not only lessen the friction associated with web2 financial services but also enable entirely new use cases. The years 2023 and beyond will be thrilling!
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Note: It is not intended to be legal or financial advice and is just for informational reasons. Before making any financial or legal decisions, please seek the advice of a certified practitioner.
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