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Bank of America Sees No Crypto Winter Given User Adoption, Developer Activity Growth
Still, crypto market upside will likely be limited for the next six months by Fed tightening and macro headwinds.
By Will Canny
Updated May 11, 2023, 3:22 p.m. Published Feb 28, 2022, 10:31 a.m.
An analysis of cryptocurrency flows between personal and exchange-based wallets shows a “lack of directional conviction” in the market, Bank of America said in a note entitled “Digital Assets: In the Flow.”
Tightening by the U.S. Federal Reserve and macroeconomic headwinds are likely to limit upside for cryptocurrencies over the next six months. This won’t, however, be a “crypto winter” given the level of user adoption and growth in development activity, analysts led by Alkesh Shah wrote in the note Friday.
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Bitcoin exchange outflows suggest that buying on dips is muted, while exchange inflows for ether show the potential for continued price headwinds, the bank said.
The top three stablecoins saw exchange inflows slow significantly for the second week in a row, the report said. Last week’s exchange inflows reached $517,000, down 99% from the previous week, indicating that investors may be biding their time in the current macroeconomic environment, the bank’s analysts said.
It will be difficult for the crypto market to break out of the recent trading range until concerns about a potential recession are discounted, according to the bank.
Read more: Bitcoin Resilient as Commodity Prices Inflate; Dollar Strength May Hurt
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The Federal Reserve begins Treasury bill purchases later Friday, starting with $8.2 billion as part of its reserve management program.
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