April 2023 Crypto Market Forecast

Major cryptocurrencies rallied in March—a month that has historically been one of the worst of the year for Bitcoin (BTC)—overcoming negative headlines from the collapse of Silvergate Capital and U.S. regulators taking action against top crypto exchange Binance. Financial market volatility even caused the second largest stablecoin, USD Coin (USDC) to briefly lose its peg to the dollar in March.

Looking ahead to April, crypto investors will be focused on ongoing liquidity concerns in the financial sector, additional regulatory developments, and the next batch of data on inflation and the labor market.

March Crypto Performance

Bitcoin prices briefly topped $29,000 in late March before finishing the month at $28,477, a 19.2% monthly gain. Ethereum (ETH) prices rose 9.7% in March to close out the month at $1,829.

Among the 10 largest cryptocurrencies by market capitalization, Ripple (XRP) was the best February performer with a 1.3% gain. Polygon (MATIC) was the worst performer, with a 9.8% loss.

Crypto prices have been resilient so far in 2023 after both Bitcoin and Ethereum each logged their worst annual performance since 2018 last year. Following March’s gains, Bitcoin prices are up 68.4% year-to-date, while Ethereum prices are up 49.2%.

In March, the implosion of SVB Financial (SIVB), Signature Bank (SBNY), Silvergate Capital (SI) and Credit Suisse (CS) triggered widespread fears over the stability of the banking system. However, the banking crisis also dramatically shifted investor expectations for interest rates moving forward.

A Federal Reserve policy pivot could now be coming sooner than expected, news that has helped propel Bitcoin prices to their highest level since June 2022.

Crypto Banks Collapse

Contagion from the downfall of crypto exchange FTX in November 2022 continued in March.

On March 8, crypto bank Silvergate Capital announced it would be winding down its operations and liquidating its assets. The decision came after the bank’s total deposits dropped from $11.9 billion at the end of the third quarter of 2022 to just $3.8 billion, forcing Silvergate to sell $5.2 billion in debt securities at a heavy loss.

Just two days after Silvergate announced it was closing up shop, the Federal Deposit Insurance Corporation (FDIC) announced it was seizing Silicon Valley Bank. SVB had roughly $209 billion in total assets and $175 billion in deposits as of the end of 2022.

On March 12, New York state regulators shut down crypto bank Signature Bank, which had more than $110 billion in assets and $88 billion in deposits as of the end of 2022.

In a televised address on March 13, President Joe Biden assured Americans that the financial system is sound and that all depositors at Signature Bank will get their money back.

Spooked investors sold more than $2 billion of stablecoin USD Coin after USDC parent company Circle Internet Financial said it had $3.3 billion in reserves at Silicon Valley Bank. The selling pressure dropped the price of USDC, which is designed to trade at $1, below 87 cents on March 13.

Circle reassured investors that it could cover any cash reserves stuck at SVB using company resources, and USDC recovered to the $1 level by March 13.

Crypto Regulatory Crackdown

On March 27, the Commodity Futures Trading Commission (CTFC) filed a lawsuit against crypto exchange Binance, CEO Changpeng Zhao and former compliance officer Samuel Lim alleging “numerous violations of the Commodity Exchange Act (CEA) and CFTC regulations.”

In the complaint, the CFTC claims Binance provided users access to derivatives that must be traded on regulated platforms and did so without properly registering with U.S. regulators.

Barry Weinstein, founder and CEO of VolatilityMarkets, says the Binance lawsuit was the biggest crypto news in an action-packed month.

“The biggest crypto story of March was the CFTC…suing Binance over the accusation that they are operating an unregistered securities exchange. This lawsuit is just one signal that the US federal government is going to continue cracking down on cryptocurrency custodians and exchanges,” Weinstein says.

In fact, the next major crypto target for U.S. regulators could be popular crypto exchange Coinbase (COIN).

On March 22, Coinbase announced it had received a Wells notice from the U.S. Securities and Exchange Commission (SEC) notifying the exchange that it plans to take enforcement action against the company. The SEC said it believes Coinbase violated investor protection laws, but Coinbase said in a statement that it is “confident in the legality of our assets and services.”

The SEC also continued its crackdown on celebrities who have illegally promoted digital assets. On March 22, the SEC announced actress Lindsay Lohan, boxer and social media influencer Jake Paul and six other celebrities agreed to pay a total of $400,000 tied to charges of illegally promoting crypto assets TRX and BTT.

Lohan and Paul join a growing list of celebrities and athletes that have paid fines or settlements related to crypto promotions, including Kim Kardashian, DJ Khaled, Steven Seagal, Paul Pierce and Floyd Mayweather.

Ian Wittkopp, COO and head of investment at Sino Global Capital, says investors will be following the ongoing CTFC and SEC crypto actions closely.

“Regulators have all but deprived the industry of banking and used their power to bully the industry, attacking its most prominent and respected members,” Wittkopp says. “The crypto industry is an easy target, but at some point, cases brought by regulators must hold up in court.”

Other Crypto Headlines

On March 3, Coinbase acquired crypto hedge fund One River Digital, its latest move in its ongoing efforts to attract institutional investors. Coinbase’s revenue generated from institutional trading volume dropped 67% in 2022 from $300 million to just $100 million.

On March 23, Montenegro officials arrested Terraform CEO Do Kwon and the U.S. Justice Department charged Kwon with eight counts of fraud and conspiracy to manipulate the price of stablecoin TerraUSD in May 2021. Kwon founded stablecoins TerraUSD and Luna, which wiped out $60 billion in investor value when they collapsed last year.

On March 28, prosecutors charged disgraced FTX founder Sam Bankman-Fried with conspiring to bribe Chinese government officials. The latest charges come in addition to several existing fraud charges and a charge of violating U.S. campaign-finance laws. Bankman-Fried has pleaded not guilty to the charges against him, and his trial date has been set for Oct. 2.

What To Watch In April

Ethereum prices could experience some volatility associated with its upcoming Shanghai upgrade, scheduled for April 12. The upgrade will be the final step in Ethereum’s transition from a proof of work (PoW) consensus mechanism to a less energy-intensive proof of stake (PoS) consensus mechanism, and it will unlock ETH coins users staked last year to help secure the network during the transition.

Rising interest rates were a primary catalyst for 2022’s crypto winter, but the March banking crisis completely changed the market outlook for rates. The bond market is currently pricing in a 90.4% chance of a rate cut by December, down from just a 0.8% chance a month ago, according to CME Group.

However, Ken Miller, senior advisor at Klaros Group, says investors shouldn’t assume the 2023 crypto rally will continue in April.

“There are still liquidity issues in the market left over from Silvergate and other stuff, and when that’s the case there can still be a ton of price volatility in the market,” Miller says. “This could mean the March surge is not guaranteed to hold in a low liquidity environment, so investors should not get overly comfortable that the recent surge will continue or even hold.”

In the near-term, crypto investors will be monitoring the Labor Department’s March jobs report on April 7 for any signs the tight labor market may be cooling.

Leave a Reply

Your email address will not be published. Required fields are marked *