Is a new crypto bull run about to kick off?

The so-called ‘crypto winter’ is beginning to thaw, it seems, amid growing signs that global inflation is beginning to cool, giving more impetus for central banks to unwind their rate hikes.

Bitcoin, the world’s largest digital currency by market capitalisation, climbed above $18,000 for the first time since 14 December, increasing in value by about 5% in the last 24 hours.

It came as expectations grew that US headline consumer inflation would slow to 6.5% in December from 7.1% the previous month – which it did, according to the latest data released on Thursday.

With the numbers confirming that inflation is finally being tamed, there’s a higher chance that the Fed will pursue less aggressive interest rate hikes in the world’s largest economy.

Assets that most benefitted from low interest rates were, naturally, hit hardest in 2022 by the hikes. These include stocks, especially in the tech sector, and cryptocurrencies, amongst other risk assets.

We expect as hiking programs unwind, which, despite recent hawkish guidance from some central banks to the contrary, is likely to be in the late first or second quarter of 2023, these will be the assets that will experience some of the biggest rallies.

Although, the high-octane rush of previous rallies is unlikely, instead we will see a steadier, continued upward trajectory for Bitcoin when the unwind kicks off.

Until then, many serious, long-term investors will be using the current lower valuations as a buying opportunity.

Investors are starting to realize that, clearly, headwinds remain for economies around the world, but that some quality assets, like Bitcoin, are currently cheap.

Confidence is creeping back into the markets.

As I have been quoted in the media as saying previously, “One good thing about the hikes has been that as the sugar-rush of free money faded away, we could see the real value of assets. Despite coming down 70% from its hype and heat-fuelled November 2021 high, Bitcoin remains the best-performing asset class of the decade.”

Sensibly, crypto investors are already pricing in far more favourable conditions in 2023 than experienced last year, and this new US inflation data will help support their confidence.

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