While the year 2022 was centered on the theme of fundamental anxiety around inflation and rising interest rates, it is the theme of recession that will occupy the media space in 2023. What prospective evolution can we expect from the price of bitcoin if the Western economy enters a major economic recession?
Can Bitcoin be a safe-haven financial asset in an economic downturn?
We are finally in 2023 and it was time to move on for the crypto market which gave up more than 65% of its value last year. The price of bitcoin unfortunately did not serve as a hedging vehicle against galloping inflation, it is even the opposite that happened.
Central Banks adopted an arch-restrictive monetary policy to contain the vertical boom in the price regime, implying a marked rise in bond interest rates, a fundamental factor that produced a bearish effect on the crypto market capitalization.
Bitcoin never was, is not, and will never be an inflation hedge financial asset.
Inflation and rising interest rates were the dominant fundamental pair last year, and while both will remain important in 2023, it is now the likelihood of an economic recession that takes center stage. the scene.
What behavior can be expected from the price of bitcoin during a major economic recession? It is difficult to provide a statistical answer because the life of the BTC does not exceed 13 years, only two occurrences of recession are present:
- The financial crisis of 2008/2009 (the birth of BTC);
- The health crisis of 2020.
Overall, in times of recession, it is the trend of the stock market and the US dollar on Forex that can affect the dynamics of cryptos. It seems presumptuous to me to think that cryptos could be a safe haven in the event of negative economic growth.
To envisage the end of the crypto bear market in 2023, the global economy would have to offer a “soft landing” type economic framework. Below is a table that summarizes the prospective evolution of BTC in 2023, depending on the potential macroeconomic framework.
Table that proposes the status of certain global-macro criteria according to the prospective economic framework of 2023
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Technical analysis points to a return to volatility for early January
Now back to the technical analysis of bitcoin price. The dominant technical factor remains the bearish technical breakout of early November last year, in the wake of the FTX affair. The market remains in a bearish trend as long as it holds the major technical resistance at $19/20K and the natural technical target is still established at $11/12K, a price level that I have described in my previous analyzes techniques posted in the columns of Cryptoast.
The current stabilization period at $16,000 has a technical source, this is the 50% retracement ratio of the entire bullish phaser that was built between the low point of the health crisis and the historic high point of November 2021.
On the other hand, bullish technical divergences (see chart below) are present and they maintain the balance of technical forces between the following two scenarios:
- The continuation of the downtrend towards the support zone of $11/12K;
- Reintegration with volume of 19/20K$.
The measurement of short-term volatility (the one at 7 days) arrives on a big support, the market will make its technical choice this first half of January.
Chart that exposes Japanese candles in weekly data from Grayscale’s Bitcoin background
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Source: Vincent Ganne
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Vincent Ganne is a market strategist, technical analyst, trainer on the stock market and speaker on BFM Business. With a long experience in the field of analysis, he offers a global approach to financial markets. Both from a macroeconomic point of view and from a microeconomic point of view. Vincent Ganne also uses many aspects of chart analysis with the aim of forecasting trends in financial assets over the medium and long term.
Vincent Gane
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