After a rough and difficult patch of downturns and dips , the cryptocurrency market is finally witnessing a bullish momentum on the back of relaxed global macroeconomic headwinds and cooling inflation. The global crypto market capitalization has crossed more than a $1 trillion market, supported by high and stable trading volumes.
The poster boys of the crypto market – Bitcoin and Ethereum – showed incredible stability and both have managed to trade in a positive range ever since a month.Experts are anticipating this rally to continue even in the coming weeks due to slight indication of ease in macroeconomic conditions worldwide and especially in the key markets of the U.S. and the UK.
Let’s have a look at the top reasons which have turned the crypto market bullish and what should be the approach of investors in this unexpected crypto rally.
Crypto Markets On A Road to Recovery
Overall, the broader cryptocurrency market gave a fresh pump this year with major coins taking the lead. The world’s largest cryptocurrency Bitcoin rebounded sharply and traded near the levels of $23,500 with a positive change. From its lowest point in 2022 – $15,523, reached on November 9, BTC has shown almost 40% rally in the month of January 2023, which reached a 30-day high of $23,954 on January 29, 2023.
Similarly, Ethereum has also shown immense strength and has jumped nearly 5% in the last one week, with the current price trading at $1,644.
The altcoins market has been also performing tremendously well and showing major strength over the past two weeks. ADA and SOL have risen over 20% each, since the beginning of 2023. However, other altcoins such as AVAX (82%), FTM (143%), and particularly APT (382%) have seen an impressive performance in January as compared to last year. The broader crypto market is trading in “green”, adding much to the delight of crypto investors.
All the major cryptocurrencies faced a massive correction till the end of last year, following the collapse of the crypto exchange FTX in November 2022. Crypto market ended the year 2022 with a staggering approach. However, it is quite evident that now bulls are back into the show in 2023.
How the Crypto Market Turned Bullish?
The cryptocurrency market has recorded some positive signs due to ease in macroeconomic activities which has led the crypto price to rally. Moreover, the overall trading volume of the crypto market has recovered to levels not seen since June 2021.
This rally in the crypto market was majorly seen, as soon as the U.S. Federal Reserve decided on a minor 25 basis points (bps) rate rather than 75 bps hike amid cooling inflation, solid employment data and recovery in GDP numbers. It was expected that the Fed might take an aggressive approach and might do a 75 bps interest hike. Thus, the current interest rate hike of 25 bps has been welcomed with a positive note by crypto market participants, implying that the Fed might be on the winning side in its battle against inflation.
Furthermore, the rate hike decision has directly impacted the U.S. dollar too and weakened it to a great extent, as the weak dollar has always boosted the price of cryptocurrencies.
Not just the U.S. market, but several macroeconomic factors have also indicated slight recovery signs in China and the other major global economies. Apart from these factors, the reopening of China’s borders almost after three years of Covid-19 closure and efforts by other central banks to tackle inflation has improved sentiments in the crypto market.
The past five to six months has been no less than a roller coaster ride for the cryptocurrency market. Due to massive global uncertainties and FTX fallout, the markets have been hit worse. Let’s have a look at the figures of market capitalization over the last year, from November 2022 to February 2023:
Crypto Market Capitalization
What Should Indian Investors Do In Crypto Rally?
The upside momentum in cryptocurrencies might be able to bring back not just the retail investors but also the high net-worth individuals, institutional investors, and corporates to seize some of the wild short-term trading gains.
While there is a rally in the crypto markets, it is important to follow the simple rules and strategies to invest sensibly, such as:
- Diversify your portfolio and invest in a mix of investments.
- Spread your risk to lessen the impact of a potential downturn in any specific crypto.
- Do you research (DYOR) and keep yourself updated with industry developments.
- Do not make impulsive decisions and get caught up in the hype.
- Follow a disciplined investment pattern.
- Lastly, security should be a top priority for investors, so, store your crypto assets in secure wallets with proper backups and security measures in place.
Experts observe that crypto investors should continue taking a cautious approach as any new development in this space can lead to extreme situations.
According to the research team of one of the largest Indian crypto exchanges, CoinDCX, “This time the narrative is different as it’s more macro-driven, projects development-driven, and such momentum can be treated as a mid-bear market rally. So, investors in such a narrative should keep limited exposure to the small cap token and deploy the majority to projects that are fundamentally strong and getting developed day by day.”
Raj Karkara, COO, Zebpay, advocates for an education-first approach as it is important to regularly monitor the crypto market and stay up-to-date with news and technical analysis.
“It is imperative that investors fully understand the fundamentals of a crypto token before investing. There are several investment strategies one can use during a rally, so that one can invest sensibly.” said Karkara.
The CEO and founder of Taxnodes, Avinash Shekhar, advises Indian investors to not go just by word of mouth or popular narratives, rather spend time understanding the fundamentals of the crypto space.
“Investors should start with small amounts and gradually increase their exposure by making informed investment decisions rather than wagering on speculations. As an asset class, cryptocurrencies are volatile, at present. However, backed by innovation and conducive regulations, the true potential of the Web3 space will begin to materialize and cryptocurrencies as an asset class will mature”, said Shekhar.
Undoubtedly, the crypto markets appear to be recovering from the recent crash but the sentiment of “fear” continues in the crypto community. Experts strongly feel that sentiment is still mixed for the Indian crypto industry as they were too hopeful to get some respite in tax rate from the government, but the Union Budget 2023 announced on February 1, 2023, skipped any new mentions on tax relief to the sector.
In India, there is still ambiguity on high taxes and on the regulatory framework, however, with the ease of macroeconomic conditions worldwide, the trade volumes on Indian exchanges are expected to rise from rock-bottom prices. Investors have been advised to continue to trade cautiously and vigilantly, as one never knows whether the crypto rally is here to stay or not.
