The year 2023 started out well for the price of Bitcoin.
In fact, 2022 ended with Bitcoin at $16,500, following the November crash caused by the FTX bankruptcy.
The rise in the price of Bitcoin (BTC)
The climb back up began on 2 January, when it rose from $16,500 to $16,700.
These days, even such an insignificant rise attracted interest because of the very low volatility in December.
Indeed, 2023 brought precisely an increase in volatility compared to December 2022, when Bitcoin’s price had risen well above $17,000 for only four days.
Even though Bitcoin’s price had also risen above $18,000 as early as 14 December, it stayed there for a very short time, so that by the next day it had already fallen to $17,300.
By contrast, the 2023 increases seemed slower and more gradual, thus more solid.
On 4 January it had already risen above $16,800, and on 9 January it rose above $17,000. Therefore it took it nine days to rise from $16,500 to $17,700, but only three to rise above $18,000.
This shows rather clearly how volatility is higher in these early days of 2023 than in the last days of 2022, even though the current price is still far from the $21,000 of 5 November.
It is worth noting that even between 30 November and 14 December there had been a rise similar in magnitude to that of the early days of 2023, but it was much slower and more nervous. Whereas the current one has been gradual, and on the surface much more solid.
Bitcoin’s year-end price decline
After all, during bearish years, the price often drops at the end of the year.
It is possible that this phenomenon is related to a precise dynamic that has to do with taxation.
In fact, to those who are ending the tax year with a loss it might be convenient to sell before the end of the year so as to record capital losses that can be deducted from taxable income.
Later it might be convenient to buy back at the beginning of the year if the new purchase price is not much higher than the selling price.
So it may not be an accident that during bearish years the minimum price spikes occur precisely between November and December, that is, when loss traders may want to record capital losses by selling.
And it may also be no coincidence that as the new year begins, prices rise again, thanks to new purchases by those who sold before the end of the year to record capital losses.
If so, there would be a reason behind the fact that the early 2023 rise in Bitcoin’s price appears more solid than that of the first two weeks of December.
In reality, it is by no means certain that the current rise will continue.
Much will likely depend on the evolution of the macroeconomic and financial picture globally.
A significant fact is that the traditional stock markets these days are also rising slightly, and in particular the US stock markets.
In addition, the Dollar Index (DXY) has been falling now since before mid-November.
DXY measures the value of the dollar compared to other international currencies of global importance. Typically when it rises it means that financial markets take refuge in the dollar by buying it in bulk and driving up its value. This is what occurs in risk flight periods such as 2022.
The Dollar Index began to surge in June 2021, rising in just two and a half months from 90 to 114 points. For such an index these are truly remarkable and abnormal increases, but then again, the flight from risk was more than evident.
Until November it had remained around 110 points, but since then it has begun a sharp descent to below 103 points in recent days.
This descent indicates a possible return of appeal for risk investments, not least because low-risk investments such as the dollar either do not produce significant gains, or even produce small losses.
Should this trend continue, it is to be expected that Bitcoin’s price trend may also continue, but these are trends subject to even sudden changes due to any big news in the macroeconomic and financial picture globally, and especially in the US.
To be fair, although the Fear & Greed Index still indicates a level of substantial fear in the crypto markets, the data of the very last few days seem to indicate some optimism. Should such optimism be negated there is nothing to prevent the spread of a new wave of fear, resulting in a new drop in prices.