Early Q1 2023 Crypto Prices Rally On Favourable US Inflation Data

Thursday, January 12, 2023, saw the release of December 2022 US inflation figures by the Bureau of Labor Statistics. The Consumer Price Index (CPI) dropped by 0.1% in December 2022 largely due to declines in both the gasoline and energy indices. Annual Headline CPI rose by 6.5% and the December 2022 unemployment rate was down to 3.5% from 3.6% reported in November 2022.

The start of 2023 has been marked with minimal price movements across most of the cryptocurrencies. However, on January 13, 2023, major cryptocurrencies rallied to the US inflation data, with Bitcoin testing the US$19,000 mark, Ether at US$1,400, and XRP and Cardano at $0.38 and $0.33, respectively, according to CoinGecko data. 

The crypto rally continued on January 14, 2023, with Bitcoin trading at US$21,000, Ether trading above US$1,500 and XRP trading at US$0.40 The recent rally has seen the global cryptocurrency market cap reach the US$ 1 trillion mark, a rise of about 25%  since the beginning of 2023.  

Is Bitcoin heading to $25,000?

Several events may impact crypto prices within Q1 of 2023. The next Fed interest rate announcement is scheduled for February 1, 2023. The Federal Open Market Committee (FOMC) has a scheduled release of its minutes on February 22, 2023. The FOMC minutes have provided investors with some of the rationales behind the Fed’s latest policy decisions.

Another Fed interest rate announcement is scheduled for March 22, 2023. Investors and traders will closely watch how regulators respond to the latest inflation data.

Some of the crypto challenges seen in 2022 are already spilling over into 2023. Crypto companies announcing more job cuts in 2023 include Crypto.com, Huobi, Coinbase, SuperRare, and Blockchain.com.

The contagion from the collapse of FTX carries over with the former CEO of FTX, Sam Bankman-Fried (SBF) set to go on trial in October 2023. Two of SBF’s former associates, co-founder Gary Wang and the former chief executive of Alameda Research Caroline Ellison have already pleaded guilty to fraud charges. Other former executives are reportedly cooperating with federal prosecutors and investigators on the dealings within FTX.

Global Crypto regulation is, in general still fragmented and some way from implementation. During Q1 of 2023, the European Parliament is expected to vote on the Markets in Crypto-Assets (MiCA) Regulation that will take effect in 2024. MiCA is aimed at creating a harmonised crypto legal framework across the European Union (EU) and closing gaps in the existing EU financial services regulation.

The above events are likely to shape crypto price movements in 2023. It is not clear how long this crypto rally may last but the crypto markets are in much need of positive news following the challenges of 2022.

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