Bitcoin spent the last week of the year frozen near its recent lows and is set to mark its worst annual performance following FTX’s horrible collapse more than a month ago. While the tight range in the market reflects some resilience, the first quarter of 2023 may not bring the much-needed rally either.

No Santa Claus rally for bitcoin 

It was a disastrous year for cryptocurrencies as a series of failures among high-profile exchange companies sent bitcoin sinking by 75% from a record high of $69,000 in November 2021 to a two-year low of $15,479. Christmas bonuses could not prompt the much-needed Santa Claus rally either; despite crypto markets being open 24/7, traders stayed away from trading as more and more companies in the industry faced the FTX liquidity strain aftermath effects. The power outage caused by the severe winter storm in North America was another headwind lately, shutting down mining operations.

Undoubtedly, it may take time until the dust settles down and regulatory reforms ensure the return of deposits without distorting the decentralized nature of the blockchain network. Until then investors will keep a close eye on other key market players such as Binance to avoid another Lehman moment within cryptos.

Q1 may not be bright either

Having said that, the five-week straight line in Bitcoin’s chart suggests that there is a group of investors who are still willing to buy the dip. Perhaps the market looks attractive to buyers at the current lower levels, but excluding the exciting rally in 2021, experience from the past decade, suggests that the first quarter has been rather a dull period.

Moreover, considering the slashed crypto market cap, the low volumes, which returned to pre-pandemic levels, and the drop in the volatility index, which is hovering near multi-year lows, investors may have little incentive to increase their exposure to the self-governing crypto market. Instead, if more bankruptcies occur in a potential stagflationary environment, where economic growth slows but central banks deliver additional rate hikes to cool inflation down to their target, traders would like to exit risk-on positions in stocks and cryptos. It’s worthy to note at this point that the positive correlation rate between bitcoin and US stock indices bounced up again to high levels in December.

Energy prices will be another key factor to watch as miners’ profitability has been suffering from high electricity prices in 2022.

Technical outlook 

From a technical perspective, the short-term outlook for BTCUSD looks cloudy as well. The 20- and 50-day simple moving averages (SMA) have been acting as strong resistance around 17,000 over the past ten days, keeping the focus on November’s low of 15,479. Should the downtrend resume below that floor, the price may seek support near the 13,300 handle last seen during October-November 2020. A continuation lower would clear the way towards the 10,000 psychological mark.

Alternatively, a close above 17,000 would bring the 200-day SMA at 19,680 on the radar unless the 17,880 barrier proves hard to break again. November’s high at 21,500 would come next into view ahead of the 23,000 mark if bullish pressures persist.