The price of major cryptocurrencies such as Bitcoin or Ethereum could maintain a relatively high correlation with the S&P 500 index currently standing at around 0.52. Meanwhile, the value of so-called Meme coins such as Dogecoin or Shiba Inu, among others, seems extremely difficult to predict as it depends largely on their popularity at any given time and general sentiment in the crypto market. For this reason, the current extremely pessimistic mood may be expected to warm up on the virtual currency markets as soon as the stock – and especially tech – market is revived. Nevertheless, it should be emphasized that a return to their peaks and the previously occurring FOMO phenomenon may be unlikely to happen in 2023.
Looking at the strong correlation of most of the cryptocurrency market to the Bitcoin quote (of more than 0.6 according to Conotoxia analysts’ calculations), it is rather impossible to spot a 'dark horse' in this market. As in horse racing, the outlier is only found during the race.
Surely, one of the first factors to shake confidence in digital currencies last year was the collapse of the stablecoin TerraUSD. Although, the crypto market’s further downturn is believed to be more closely linked to the tech stock market decline rather than UST’s collapse. Furthermore, the bankruptcy of the FTX exchange was another hit to the already volatile crypto market confidence. According to data from “Stablecoin Printer”, not a single USDT, USDC, or BUSD was printed during December 2022, meaning that the growth in the interest in stablecoin has fully halted. A potential breakthrough in the future may be a stablecoin that is fully backed by a fiat currency inducing confidence among investors as opposed to the currently used algorithmic solutions.
