We are nearing the middle of 2023 which has largely been positive for the crypto market. After four consecutive green months, May had to print in red to normalize expectations. It did so without much volatility in spite of speculations around the US debt ceiling on one side and meme coin fest on the other.
In this context, we map key trends for June and the upcoming months.
1) June is mostly a red month
In the past five years, June has been mostly in the red (with negative returns). June was 2022’s worst month after the LUNA debacle hit us. Given that pre-halving years (2015, 2019) have had an equal share of positive and negative months and that 2023 started with four positive months, we are likely to see more red months than green going forward this year. Essentially, new market liquidity is not yet arriving and hence rotation of cash between assets is driving mini rallies.
2) Debt ceiling raise can bring cheer to the market (briefly)
US debt ceiling raise will likely contribute to heightened volatility in the upcoming week. The US Senate voted on the agreement this week, clearing a major legislative hurdle with just days left before the US is expected to default. This news is likely to reflect positively on the market in the short term.
A US default, however, would be catastrophic for all financial markets.
3) US is not expected to raise interest rates
Another key signal for the markets this month will be from the US Fed meeting on June 14. According to latest analyst estimates, there is only a 24% chance of a 25 bps increase in interest rates implying that the market anticipates the US Fed to hold interest rates at current level. If that eventuates, financial markets are likely to rally (again, in the short term).
4) Bitcoin dominance is holding fort
Since mid-April, BTC.D has not fallen below 46%. This is a strong sign of a consolidation that can lead to a rally in BTC.D in the upcoming months. We anticipate BTC.D to hit at least 60% before altcoins find a bottom against BTC in this bear market cycle. In the 2018–19 bear market, rotation from altcoins to BTC was a key trend, leading the BTC.D to reach peaks above 70%, in contrast with the current dominance of 46%.
What does this mean for you?
June will likely be a mixed month for crypto though a couple of positive macro effects can push the assets into green territory. We still anticipate some pain going ahead in 2023 as new liquidity (and new retail investors) aren’t yet coming into the market for a sustained rally. Hence, we encourage you to build your BTC and ETH positions regularly via cost averaging while avoiding altcoins in the short-term.
