Crypto's Final Chapter

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Crypto markets analyst at K33 Research, Vetle Lunde, has observed similarities between Bitcoin's recent upward trend from the slump of 2022 and its price behavior during the period of 2018 to 2019.

In an interview on CoinDesk TV’s “First Mover” program on Monday, Lunde said that "the current drawdown and recovery stage is remarkably similar to that in 2019, both in duration and price movement.”

Last week, Lunde wrote in a research note to clients that Bitcoin's value could climb up to $45,000. At the time, BTC was trading at approximately $29,440, indicating a 2% decrease in its value, despite having increased by approximately 80% in 2023. This resurgence comes after a tumultuous year during which several major companies filed for bankruptcy, causing cautious investors to withdraw from the cryptocurrency market.

“We saw throughout the latter part of 2022 a lot of forced selling, and also selling from investors who grew cautious,” Lunde said. “This has led people to be underexposed. And has also enticed a lot of people to short (crypto) being conservative with adding exposure. This creates this dynamic where bitcoin feeds on your short squeezes and moves higher.”

According to him, the fact that derivatives sales have remained negative to neutral, despite recent increases in price, is a clear indication of investor apprehension. However, this sentiment may shift in the future, but the market's limited liquidity could still have a potential impact on future pricing.

Lunde is of the opinion that the slight indications from the US Federal Reserve last week regarding a potential easing of its hawkish monetary policy, in light of slightly encouraging inflation data, could have a positive impact on market sentiment.

He attributed the decline in crypto prices last year, in part, to companies overexposing themselves during a period of zero interest rates.

“It was a lot of spending, a lot of focus on growth,” Lunde said. “So you had this environment where miners took a lot of fiat that held a lot of bitcoin and then were exposed to falling prices, in addition to all the crypto banks starting to neglect due diligence.”

But the industry-wide crisis of 2022, which included multiple, major firms declaring bankruptcy, including crypto hedge fund Three Arrows Capital, has already been benefiting markets by weeding out bad actors, Lunde suggested. “A lot of these rotten fruits have been washed out of the market,” he said. “So the entire market is in a more robust stage right now where it can handle higher interest rates for longer.”

He added: “The industry has learned. I'm pretty sure that we will experience similar kinds of crisis in the future, unfortunately. But for now, those kinds of risks feel washed out of the market. So the market feels a lot more safe at the moment.

Source Coindesk