March Starts Off Well For Bitcoin. History Warns It May Not Last.

After a ferocious rally to start 2023 slightly stalled in February, BitcoinBTCUSD +2.35% and other cryptocurrencies were surging on Wednesday, kicking off March on the right foot. History suggests that the coming weeks may be considerably more difficult.

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Over the previous 24 hours, the price of Bitcoin has increased by 1.5% to $23,750. Although the largest digital asset has gained around 40% so far this year, it has mainly failed to consolidate above the $24,000 level, let alone over $25,000—the pinnacle of a recent rally and the asset's highest position since last summer. The price of bitcoin increased from about $16,500 at the end of December to over $23,000 by the end of January, but it hasn't increased by the same amount in the following month.

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According to Alex Kuptsikevich, an analyst at broker FxPro, "March is considered an unpromising month of the year for the leading cryptocurrency, having declined in eight of the last 12 years with an average decline of roughly 15%. According to Kuptsikevich, Bitcoin has typically increased by 16% in March when it has increased.

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Investors should continue using stocks as a benchmark even though Bitcoin's rise at the start of the year significantly outperformed the Dow Jones Industrial AverageDJIA -0.71% and S&P 500SPX -0.30%, with the correlation between cryptocurrencies and the stock market diminishing. The macro picture and sentiment towards risky assets in general continue to have a significant impact notwithstanding the importance of crypto-specific factors like regulatory scrutiny and institutional uptake.

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Investor anxiety over the U.S. inflation situation prompted the Federal Reserve to quickly boost interest rates last year. Higher rates reduce investor interest for riskier investments like stocks and cryptocurrencies, and recent indications that inflation may be enduring have increased the likelihood that rates will remain higher for an extended period of time.

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Nonetheless, following such a promising start to 2023, cryptocurrency traders are still anticipating greater increases. In a note published on Monday, analysts at the cryptocurrency exchange Bitfinex stated that market movements show "sentiment across options desks is moving bullish again after a week of maintaining neutral."

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Beyond the market for cryptocurrency derivatives, the technical prognosis appears promising.

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According to Kuptsikevich of FxPro, "the robust growth momentum in January and the repeat of local highs in February suggest that the bulls prevail. At the same time, the weekly timeframe's technical picture indicates that the market's positive outlook will only be strengthened by a consolidation over $25,000

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The second-largest cryptocurrency behind Bitcoin, EtherETHUSD +3.00%, increased 1.5% to $1,650. Smaller cryptocurrencies, or altcoins, were more inconsistent, with Cardano barely moving but Polygon rising 2%. Dogecoin was just above flat and Shiba InuSHIBUSD +2.24%, which has appeared to be in risk of a reversal, were both meekly down 0.5%.