May 4, 2023 2 min read

Executive summary: Macro Brief 2023: How Will Macro Impact the Crypto Markets? (March 2023)

In this article, I explore the impact of macroeconomic factors on the crypto market in 2023, discussing the key events that led to its downturn in 2022, the current macro situation, and the outlook for the rest of the year.

Summary: The macro environment in 2023 plays a crucial role in driving the crypto market trends.

The Macro Situation Going Into 2023:

Crypto market struggles in 2022 due to worsening macroeconomic conditions.
War in Ukraine, inflation surge, China's lockdown, and unfriendly US relations contribute to the downturn.
Central banks shut down the money printer.
Reduction in global financial market liquidity leads to decreased crypto prices.

The Macro Situation In 2023 (So Far):

Positive start to 2023 with a combination of crypto-specific narratives and macro data.
Bitcoin up over 40% in 2023, ETH liquid staking derivatives gain popularity, and fewer sellers at $16K Bitcoin valuation.
Liquidity injection and inflation rate decrease.
People's Bank of China increases liquidity and inflation rates decrease faster than anticipated, benefiting the crypto market.

The Macro Outlook For The Rest Of 2023:

Three crucial questions determine market trends.
Will inflation reach the Fed's 2% target? Will there be a recession? Will the Fed "pivot"?
Stronger US Dollar Currency Index poses challenges and a potential recession depends on unemployment rates.
Recession depends on low unemployment rates, while inflation staying high could challenge the Fed.

Conclusion:

Crypto likely in an accumulation mode in 2023, with the potential for breaking out of its current range.
Possible rate cuts by September 2023 could catalyze the breakout.
The macro environment in 2023 significantly influences medium-term price development.
More liquidity and lower interest rates serve as favorable factors for the crypto market.

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