Crypto bracing for March earthquake after US$200 billion Bitcoin and Ethereum rally


Bitcoin BTC -3%, Ethereum and the wider crypto market have become closely linked to the stock market, soaring partly due to an equity rally since the beginning of 2023 (though some think they’ve discovered the real “mysterious” reason behind the rally).
The bitcoin price has surged over the last two months, boosting the etherem price and other cryptocurrencies, but some fear the rally may be short-lived. NURPHOTO VIA GETTY IMAGES

The Bitcoin price rocketed over the last two months, climbing alongside stock markets, with bitcoin, ethereum and other major cryptocurrencies adding US$200 billion and fueled by rising expectations Federal Reserve could be about to pivot from its program of interest rate hikes.

Now, Morgan StanleyMS -0.1% strategists have said they think the recent stock market rally is “a bull trap” and predicted March will bring a stock market crash that could drag down the price of bitcoin, ethereum and other cryptocurrencies.

“We think March is a high-risk month for the next leg lower in stocks,” Morgan Stanley analysts led by Michael Wilson wrote in a note seen by Bloomberg, pointing to historical data that shows bear markets often pause between quarterly earnings seasons before falling further.

“Stocks tend to figure it out a month early and trade lower and this cycle has illustrated that pattern perfectly,” Wilson’s team wrote, adding: “With uncertainty on the fundamentals rarely this high, the technicals may determine the market’s next big move.”

After Suffering an almighty crash last year, the bitcoin price has roared into 2023 but remains far from its peak. Image: Forbes digital assets

The bitcoin, ethereum and crypto market has traded in line with high-growth tech stocks since late 2020, surging to never-bef0re-seen highs before suffering an almighty crash as Federal Reserve began hiking interest rates and sucking liquidity out of the system a year ago.

However, Citi researchers have found bitcoin and crypto’s “correlations with equities have continued to decline from last year’s peaks,” according to a report seen by Coindesk.

Elsewhere, bitcoin, ethereum and crypto investors are broadly feeling upbeat due to the market’s 2023 performance so far.

“This year’s improving macroeconomic landscape, including rosier inflation expectations and a reduction in the pace of central bank rate increases, has lifted risk assets in general,” Samir Kerbage, chief investment officer at Hashdex, wrote in a blog post and pointing to the bitcoin price “nearly quadrupling the return of the Nasdaq 100” in January.

“While we don’t anticipate an ‘up only’ environment for bitcoin in 2023, we are expecting its price to be at a higher level at the end of the year with the requisite volatility along the way.”

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