Most of the time in 2023, the crypto market is experiencing reduced volatility. Investors have frozen in anticipation of further price movements, but so far quotes continue to move in narrow ranges. Experts interviewed by RBC Crypto expect the situation to change by the end of the year, and this will be influenced by several major factors at once.

The Fed and the U.S. stock market

The main factors that will play a role in Q4 include the prospects of further tightening of the DCP at the November meeting (especially if inflation rises at the end of the past month in the United States) by the Fed, says cryptocurrency market analyst Viktor Pershikov.

The fact is that a rate hike is a negative factor for risky assets. Despite the fact that the market is not laying down further increase in the Fed rate, this risk remains. And it will be aggravated if the data on price dynamics are negative or worse than expected.

Before the end of the year, we expect two meetings of the Fed – on November 1 and December 13, reminded BitRiver financial analyst Vladislav Antonov. The probability of rates remaining at 5.5% on November 1 is 79.6%, while on December 13 – 62.6%. If the Fed continues to raise rates in December, it could have a negative impact on high-risk assets, including cryptocurrencies. However, a possible softening of the Fed’s rhetoric could support the crypto market. Here, the key factor will be the speeches of the head of the US Fed Jerome Powell at press conferences, the specialist emphasized.

At the moment, investors consider it unlikely that the rate will be raised at the meeting on November 1. The odds of any additional tightening are assessed as low. They climbed above 50% after the Bureau of Labor Statistics released a report showing rapid job growth. However, dropped again after Hamas’ surprise attack on Israel.

At the end of 2023, the crypto market may be affected not only by the situation around the Fed Funds rate, but also by the dynamics of the US stock market, Pershikov believes. He explained that profit taking and the overflow of liquidity into bonds may affect stocks, as a consequence of which the stock market (primarily Nasdaq) may correct, putting pressure on the market of digital assets as well.

Bitcoin has a high correlation with the U.S. stock market. Often, a correction in securities quotes is followed by a decrease in prices on the cryptocurrency market. This is due to the fact that investors consider cryptocurrencies and stocks as risky assets. Therefore, when the situation forces to reduce risks, investors withdraw funds to less volatile instruments.

Rumors surrounding spot bitcoin ETFs

Rumors about the potential approval of spot bitcoin-ETFs will continue to play a role, but I don’t expect these ETFs to be approved before the end of 2024, warned analyst Pershikov. He urged not to expect this factor to help crypto market growth in 2023.

An ETF (exchange traded fund) is an exchange-traded fund that holds securities based on an index, sector, commodity or other asset. A share (unit) of an ETF is a registered uncertificated security, which confirms the indirect right of its owner to the corresponding part of the fund’s assets. Buying units in ETFs gives an investor the opportunity to invest, for example, in all securities included in the index on the basis of which a particular fund is collected.

The U.S. Securities and Exchange Commission (SEC) has authorized the creation of several types of bitcoin ETFs, in particular those based on futures contracts. At the same time, a spot bitcoin ETF that tracks the actual market price of bitcoin still does not exist. Despite the growing acceptance of bitcoin, the SEC remains cautious about approving a spot bitcoin ETF. Although dozens of asset managers have applied to launch such a fund.

Many are expecting the possible approval by the U.S. regulator of an ETF tied to the spot prices of cryptocurrencies, explained Nikita Zuborev, senior analyst at In theory, this could attract new liquidity from institutional investors, which will affect the quotations of the main tokens – Bitcoin and Ethereum. If many banks and large funds start holding some of their assets in cryptocurrencies, it will greatly affect the supply and demand balance, which will prove to be a good impetus for a bull rally.

Seasonality of the crypto market
Seasonality in the market means that it is characterized by moderate activity at the intersection of the third and fourth quarters of the year, but by the end of the year, usually the community of investors revives and begins to trade more actively, said Nikita Zuborev, senior analyst at In particular, October is the most successful for digital currencies. Over the past 10 years, it has been unprofitable for bitcoin only twice. In the crypto industry, this month is even nicknamed Uptober (from the English word Up, which means up).

Regulatory risks

Over the past year we have seen an increase in “tightening the screws” activity in the U.S. against the crypto industry, a slew of lawsuits against major crypto companies, which followed the even more high-profile FTX bankruptcy. The signals are very mixed, there is a risk both for the entire crypto industry in the US and for some projects in particular, Zuborev believes.

For example, if you read the recent court decision in the SEC case against Ripple “between the lines,” there you can see a huge risk for all cryptocurrencies that have a PoS mechanism for finding consensus. If they want, they can “pull the Howey test” against them on all four criteria, because it is quite logical to expect predictable income from the validation process, and the other parameters have been “proven” on the example of XRP.

“Such a ban would have a very strong impact on the market in the moment, up to a short-lived but collapse of quotations by tens of percent in a few hours,” the expert warned.

In turn, we can see the revival of interest from China. So far, very cautiously, but at the same time, quite unambiguously – while working with the crypto market is implied through Hong Kong, but potentially it already opens access to the retail market of mainland China, which can definitely strengthen the future uptrend, when and if it starts.

By Linda

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