The prices of Bitcoin, Ethereum, and the cryptocurrency market in general have become strongly linked to the stock market. It has risen just like the stock market since the beginning of 2023. The cryptocurrency market has been rising over the past two months, along with the stock markets.
Bitcoin, Ethereum and other major cryptocurrencies added $200 billion in market cap. This is supported by the growing expectations in the financial markets that the Federal Reserve may start reducing the pace of raising interest rates and tightening monetary policy during the current year 2023.
Bitcoin prices are in a bull trap
Analysts at investment bank Morgan Stanley (NYSE:MS) believe the recent rally in the stock market is a bull trap and predict March will see the stock market collapse. Which, in turn, could lead to a drop in the price of Bitcoin, Ethereum, and other cryptocurrencies.
In stock market trading, a bull trap is a buy or bullish (bull market) signal that appears in a bear market. However, this signal is temporary, and it takes a while for the price to continue its decline again. Leaving those who bought the loss pit. This signal is seen as a trap because the investor is buying the financial asset. He thinks it will increase in value, but in fact he owns a financial asset that is still declining in value.
And it came in a note by Morgan Stanley to its clients published by Bloomberg: We believe that March is a risky month for the downward journey of stock prices. With reference to historical data showing that bear markets often pause between quarterly earnings seasons before dropping further.
Al-Bikk analysts team wrote: This pattern has appeared clearly during this price cycle, as stocks generally decline about a month ago., stressing: with the uncertainty about the fundamentals, which is rarely that severe. The direction of the next big market move may be determined by technical factors.
The bitcoin, ethereum, and cryptocurrency market is trading in tune with the stock prices of high-tech companies, which have risen strongly since late 2020, reaching all-time highs. Before it collapsed after the Fed started raising interest rates and sucking liquidity out of the financial system a year ago.
See another downward rise
However, analysts at Citibank believe that the strength of the correlation between the price of bitcoin, cryptocurrency and stocks has declined significantly from last year's highs, according to a report.
On the other hand, Bitcoin, Ethereum, and cryptocurrency investors are very optimistic about the positive market performance so far in 2023.
Samir Kerbage, Chief Investment Officer at Hashdex, a crypto-asset management company, writes in a blog: The macroeconomic outlook has improved this year, including optimistic expectations of a decline in high inflation rates. and the beginning of a lowering of the pace of interest rate increases by the Fed.
It led to an increase in the prices of high-risk financial assets in general. He noted that the return of the Bitcoin price rally in January was nearly four times greater than the return of the Nasdaq 100 index
He added: Although we do not expect an absolute rise in the price of Bitcoin in 2023. We do expect its price to be at a higher level at the end of the year with a lot of fluctuations along the way.
