There is a motto in advertising called "sex sells." The equivalent of this phrase in journalism may be "bad news attracts attention." In the past few months, the crypto media has consistently raised the bar on delivering bad news. Finally, it was time for Binance, the world's largest crypto exchange, to go bankrupt.
Macroeconomic Outlook
The price movements in the crypto market justified the pessimists. On the other hand, every trend must have an end. The main argument of those who argued that the bear market would continue to deepen was the upcoming recession. Despite the rising interest rates, economic activity in the USA is alive. Due to the warm weather, natural gas prices declined, and European economies did not slow down as expected. The Chinese economy is about to leave behind the recession created by the Covid measures. We understand that the disaster scenarios written by the media for 2023 will not materialize.
In 2022 inflation created the effect of an elephant entering the glassware shop. Fortunately, the rate hikes worked, and consumer inflation in the US fell to 6.5% at the end of the year. Inflation is also slowing down in Europe. We will see the base effect on inflation in the coming months. Inflation peaked in the first three months of last year. US inflation will likely drop below five percent by the end of March. According to the website Truflation, which calculates inflation on daily data, consumer inflation in the USA is 5.5% today. Interest rates are expected to be around 5% in the US in March. This situation means that interest rates will exceed inflation at the end of the first quarter. The FED may not need new interest rate hikes in an environment with positive real interest rates. If things go well on the inflation front, we may see interest rate cuts in the second half of 2023.
Technical Analysis
Pricing in the market is as essential as macroeconomic scenarios. Are the price movements we are witnessing the reaction buying in the bear market? Or can we talk about a trend change? Whether the 200-day simple moving average(SMA) has been exceeded can give us an idea of this issue. Below we see the chart of the S&P 500 index.
It tried to cross the 200-day SMA many times in 2022 but stayed below this level. As of today, it has reached the 200-day SMA level again. The Dow Jones, however, broke above the 200-day SMA in November. Those who argue that the bear market will deepen stated that this situation will not continue for long. As of today, Dow Jones is hovering above the 200-day SMA. The Nasdaq is about 100 points below its 200-day average. On the other hand, China's stock market has been on an upward trend since September.
We are also at critical levels on the crypto front. An increase of $ 500 is needed for Bitcoin to catch its 200-day SMA. Ethereum, on the other hand, broke above the 200-day SMA yesterday. We will see whether it will be permanent at this level.
Conclusion
In 2023, a positive atmosphere emerged in stock markets and crypto. On the other hand, it is too early to declare the end of the bear market. Still, we look to the future with more hope than the last year. A few months ago, there was great uncertainty about future interest rates. Today, the gap between optimists and pessimists has fallen below one percent.
As of today, it seems that the bulls are taking control. Bitcoin rose again to the level of 19k USD. We will see whether this optimistic outlook will continue.
Thank you for reading.
Cover Image Source: Midjourney App
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