Not positive price forecasts for Bitcoin and Ethereum

Yesterday all of a sudden the forecast for Bitcoin and Ethereum prices went from uncertain to negative. 

However, an important point must be made. 

What has emerged is a slightly pessimistic picture over the medium/short term, while the picture over the long term remains unchanged. 

Moreover, the medium/short term pessimism is not particularly pronounced. 

The issue that emerged yesterday: change of course for Bitcoin and Ethereum price forecasts

Yesterday the US central bank (the Fed) decided not to raise interest rates further. 

At first the markets took it well, not least because such a pause was widely expected. 

The problem emerged later, with the following press conference by Fed Governor Jerome Powell. 

Indeed, Powell actually predicted that the Fed’s monetary policy would not only remain restrictive for a long time, but could also tighten further in the coming months. 

Markets, on the other hand, had hoped that the June pause in the path of interest rate increases could mark the end of that upward path, and that even by the end of the year the reverse path of interest rate cuts could begin. 

Instead, Powell said that by the end of the year it was possible, if not likely, that there would be one or two more rate hikes, and that rates would remain high for a long time, perhaps even for two years. 

So at that point the markets had to change course, so much so that they are now convinced that there will still be one more 25 basis point rate hike next month, while the start of the decline will be postponed until next year. 

This change of course has led to a correction, which has resulted in a general decline in prices. 

It is worth noting that the decline was triggered when the US stock exchanges closed more or less around breakeven yesterday. The drop affected the crypto markets, but also the price of gold. 

The change in Bitcoin and Ethereum price forecasts

All of this has led to a change in perspective. 

Until yesterday, the markets had imagined that by the end of the year the Fed’s monetary policy might start to become a little less restrictive, and thus some liquidity in the markets might return, albeit by a small amount. 

After Powell’s press conference, the picture changed. It is now considered likely that the Fed’s monetary policy may become even more restrictive, albeit slightly, and then remain so until at least the beginning of next year. 

Thus if there were previously optimistic forecasts in the medium term, today even these have become pessimistic, or at least not optimistic. 

In the short term, pessimistic forecasts were already circulating due to the fact that it was imagined that liquidity in the financial markets in June could shrink further. After yesterday, the assumption is that it may continue to shrink over the medium term as well, and may not increase until 2024. 

However, it is always worth remembering that 2024 is the year of Bitcoin’s fourth halving. 

Bitcoin’s price forecast

Yesterday, not surprisingly, the price of Bitcoin fell as low as $25,000, and it seems to have rested on this kind of medium-term support. 

This is a price below which it had not yet fallen since 16 March, and it is holding for now, although the current value is slightly below this figure. 

However, if until yesterday it was believed that this support could also hold throughout the rest of the year, since yesterday this prediction has changed. 

If things were to go as the Fed suggests, this support could end up not holding over the medium/short term, and the price of Bitcoin could even return to $22,000 or $20,000. 

On the other hand, if for example in July the Fed decides not to raise rates again, then things could change. 

In the long run, there continues to be some consensus on an optimistic scenario, particularly regarding a possible next bullrun after the next halving. The problem is that since we don’t know what price level it might start at, there are very conflicting predictions about the highs it might reach. 

Ethereum’s price forecast

The matter is very similar for Ethereum, although at different price levels. 

It is worth mentioning that the sort of medium-term support at $1,700 has not held, so much so that in the night the price of ETH went as high as $1,630. It is still well below $1,700 at the time of writing. 

At this point there are two lower levels remaining that could be retested, namely $1,500 and $1,400. 

Note that the current price of ETH is lower than it was in November last year just before the FTX bankruptcy. And it is also far below what it reached in September when the Merge occurred with the move to Proof-of-Stake. 

So over the medium term right now Ethereum’s price performance is lower than Bitcoin’s, so much so that for instance since the beginning of the year BTC is still at +50%, while Ethereum has slipped to +36%. 

Therefore, it is possible that during 2023 the price of Ethereum will simply follow that of Bitcoin.