Cryptocurrency prices have stabilized to a certain extent after a relatively calm weekend that followed the turbulent days that saw the banking crisis erupt. Banks’ woes have eroded clients’ and investors’ confidence and have led to large volatility and uncertainty.
Bitcoin has emerged stronger from this period of stress as lower confidence in the banking sector’s stability has pushed some investors toward digital assets. However, the quick reaction time from the regulators has helped quell tensions and has resulted in more volatility in bitcoin prices during the last week, which has traded sideways to a certain extent.
The cryptocurrency has also reacted to the series of interest rate hikes in the US, the UK, and Europe. The overall direction of monetary policy could continue to put pressure on prices to a certain extent as rates could continue rising but the expectations of a possibly softer stance in particular from the Federal Reserve could fuel appetite for risk.
The US central bank has softened its rhetoric and has pointed to the fact that some interest rate hikes might be needed during this year to keep inflation on track. However, its president mentioned that the effects of the difficulties in the banking sector would have to be monitored and could impact their views.
As a result, bitcoin could potentially see more accommodating conditions as monetary policy changes throughout the year and into 2024 if inflation continues to soften and as investors continue to monitor the banking sector.
Bitcoin has reached a new high for 2023 and could see some temporary losses over the short term if investors move to secure their gains.
At the same time, Ripple has also recorded strong gains while its legal battle against the US SEC has been moving forward and could end in its favor. A win for Ripple could reverberate positively on all cryptocurrencies as more institutional investors could enter the space while more legal hurdles and uncertainties are lifted.
* Crypto analysis by Wael Makarem, Senior Market Strategist – MENA at Exness.