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| By Alex Benfield |
Despite taking a serious beating, the crypto market finished 2022 relatively stable and without its characteristic volatility.
While we are still experiencing an unstable macro environment of rising rates and high inflation, last year's struggles have ultimately helped steer crypto in the right direction.
Namely, the breakdown in centralized finance infrastructure has increased the demand for self-custody and decentralization.
Now, as we start the new year, we're starting to see volatility creeping back into the crypto market.
Bitcoin (BTC, Tech/Adoption Grade "A-") has gained about 5% year to date as it looks to break above its current trading range.
Sadly, that 5% isn't really anything to write home about. We won't be taking notice of the current rally until Bitcoin can at least climb above $18,000. That will be worth giving this rally more attention.
If it can break through that level, we'll eye resistance at $20,000 after.
Besides 5% being a paltry move by crypto standards, this rally isn't garnering confidence among the Weiss Crypto team because it isn't powered by true momentum. BTC is gaining without any real driving narrative.
It's possible that what we're seeing now is just seller exhaustion. The silver lining here is that could indicate that we're close to the bottom.
Additionally, should we get some good news — such as the rumored change in attitude from the Federal Reserve — Bitcoin may be able to gain the sustained momentum it needs to break through resistance levels.
Here's BTC in U.S. dollar terms via Coinbase (COIN):
Ethereum (ETH, Tech/Adoption Grade "B") has had an even hotter start to 2023, as it's up 11% YTD and appears to be picking up some momentum along the way.
If we factor in that ETH never broke below its June lows in the post-FTX collapse, it looks a bit more bullish than BTC.
While this is a good sign, we would still like to see some more positive momentum in ETH, ideally having it climb above its November high of $1,650.
Here's ETH in U.S. dollar terms via Coinbase:
We know that ETH tends to lead other altcoins when conditions are bullish, but how is it performing relative to the altcoin market in today's conditions?
In short, the altcoin market is a mixed bag right now.
There isn't much consistency across assets or any real momentum to speak of. That's pretty much what we would expect during these neutral periods of low volatility.
Right now, it's still too early to say that altcoins have registered a bear market bottom … or if they're even close. Some assets look better than others, some look worse.
Take Solana (SOL, Unrated) for instance. This network took a massive beating in the wake of FTX, mainly due to Sam Bankman-Fried's close ties to the protocol.
SOL had been hovering around $35 before the FTX implosion but fell to as low as $8 in the aftermath. Since the low, SOL has been able to rally to $15.45, or a gain of 93%.
Those numbers would look impressive … if Solana wasn't down 94% from its all-time high.
Right now, the market appears to be questioning the long-term health of the Solana network. Those bullish on the project might see this as a great opportunity to build up a long-term position of SOL.
While that would be far from a safe bet, it could be seen as a high risk, high reward trade for those who have the stomach for it.
Here's SOL in U.S. dollar terms via Coinbase:
Lastly, let's look at another one of our favorite cryptos, Polygon (MATIC, Tech/Adoption Grade "B+").
I'd venture so far as to say that MATIC was hit as hard as any asset by the downfall of FTX, but not in the way one might think.
MATIC had been gaining some serious momentum and was starting to break out into a rally in the beginning of November, climbing from 85 cents all the way to $1.30.
Then FTX took the wind right out of its sails, sending the price of MATIC back down to about 80 cents.
MATIC is once again back to trading at about 85 cents, up about 12% YTD.
While Polygon has picked up some positive price action so far this year, it will be interesting to see how it performs when market conditions change. There's a chance that if the entire market begins to gain some momentum, MATIC may pick up where it left off and break out into another rally.
Here's MATIC in U.S. dollar terms via Coinbase:
Polygon as a project has seen massive success lately. New partnerships have been created all over the place as Polygon non-fungible tokens have picked up major momentum.
This is one project I'll be keeping a close eye on this year.
What's Next
It's encouraging to see a bit of positive momentum in the crypto market without any sort of big market driving catalyst.
Despite the words coming from Fed Chair Jerome Powell, we do expect the rate hikes to slow down and hopefully even stop sometime in the first quarter of this year.
All markets are likely to respond positively to that news, and crypto is no exception.
Should we see a rally in the crypto markets, our first order of business will be to figure out whether it's a rally to sell into, or if it might have legs.
Stay tuned to Weiss Crypto Daily to find out.
Best,
Alex
