This week, the US Fed increased interest rates by 25 basis points, indicating that a pause in hikes is soon in order. This has brought the benchmark funds rate to the 5-5.25% range, the highest in 16 years. Meanwhile, bank failures in the US are triggering an investor preference for Gold and… Bitcoin. 

What does this mean for you? We decode this, among other trends, today. 

1. Is Bitcoin’s rally nearing an end? 

From the chart below, we can see that since 2013, this is the first time, BTC has registered four green months at the start of the year. What’s striking is that when this happened in 2013, BTC dropped in value in May and June. However, historically, May (and June) have been great months for BTC. Other indicators are also giving out mixed signals. 

Source: Into the Cryptoverse 

1. US regional banks are tanking 
   
   Earlier this week, JP Morgan bought First Republic Bank’s assets while stockholder values have been wiped out. Many mid-sized regional banks are facing huge deposit outflows and a rapid decline in their share prices.
   
   
   
    Source: Bloomberg As deposits are withdrawn, the stress on the banking system will rise and more banks are likely to fail. The price of Gold, per ounce, is now at a historical high of $2,050. BTC’s claim to being a safe haven is going to be tested this year given Gold’s direction. If BTC continues to hold the fort, the narrative gets solidified for a bright future. 
    
2. Silk Road BTC batch could be sold in May 
   
   The US Department of Justice seized more than $3 billion worth of Bitcoin last year affiliated with the dark net marketplace Silk Road. They sold a huge chunk of it in March 2023 ($215 million) — and have announced plans to sell more. 
   
   
   Source: Dune 
   
   Last week, Arkham, a crypto intelligence provider, falsely notified users that Silk Road BTC addresses were making transactions, leading to imminent fears of selling pressure. This, in turn, resulted in price plummeting from $29,700 to $27,700 in under an hour in the BTC derivatives market. BTC prices recovered as soon as Arkham issued a clarification. However, a continued short rally in BTC will make the government consider dumping a second batch of 10,000 BTC into the market, which could negatively impact its prices. 
   
   What does it mean for you? 
    
3. Be cautious for now: With the next Bitcoin halving just a year away (do read our piece from last week here), we anticipate BTC to end 2023 in the $30-40,000 price range. However, a strong fall can’t be ruled out in some months especially with the risk of a US recession sometime this year. We advise caution for the summer ahead – the crypto market is not likely to rally into obscene values yet. Cost averaging your buys continues to be the best approach given uncertainties and mixed signals in the market. Stick to BTC (and ETH) for now – altcoins can lose value quickly if market sentiment turns red.
    
4. The time to be aggressive will present itself: There will be a time this year when BTC and altcoins are in ‘deep value buy zones’ as compared to wider financial markets. This may coincide with the US cutting interest rates eventually – we believe this will not be the case in the next 3 months. Hold most of your capital till then, also consider short-term fixed deposits to preserve value accounting for inflation