The new year begins with a generally somber or dark mood, product of the negative effects and liquidations that occurred in 2022, leaving out of the game to large exchanges that made life in the crypto market, so that these scenarios have awakened an apparent disinterest of investors or otherwise are just taking advantage of new opportunities in the prices that at this time are presented.

So it becomes imperative to take positions and act on them, as the projections from the surveys are not positive at all, so they continue to project a major recession at least from the point of view of traders on Wall Street, which means more pain for the markets. In other words, valuations are even lower due to a shortage of buyers at least in the short term as the future is projected to be bleak.

Image courtesy of: Mohamed Hassan

In this sense, it is to be expected that investors, and even more so those who make a living in high-risk assets, have focused on accumulating liquidity, which gives them time to find better times to invest, so that they are still betting on more painful drops in the price action of various assets.

Consequently, various actors have been orchestrating the economic debacle in 2022 and is projected for the current year, where inflation, the labor market and monetary policy are major players in the scenario of fear that is being experienced.

Consequently, when talking about inflation as a problem, it is important to know that supply-side failures are beyond the reach of central banks so that the logistics crisis will create inflationary pressures on the supply side if the railway system falls into unemployment, or failing that if oil prices rise because of OPEC cuts or if China stops its factories, in the short term we have very little to do but to continue to ride out the decline in asset prices.

In this sense, how do we envision the world economy in 2023? And to answer this question we must know that if supply falls, the only way to restore equilibrium is to reduce demand through monetary policy. Spending slowed as the cost of credit rose. But when spending falls, so does income. Thus, the new reality calls for a recalibration of the valuations of productive and non-productive assets.

Consequently, not being clear about what lies ahead has made possible the current uncertainty, which is nothing more than our inability to predict the exact behavior of the global supply chains, so that any event that slows down supply will push prices up, which will automatically be another reason for the Fed to intensify monetary tightening, this will undoubtedly affect the price action of the various known assets S&P 500, NASDAQ, Bitcoin, among others.

Image courtesy of: Pete Linforth

Therefore, the temporary painful situation becomes necessary to return to the 2% year-on-year inflation target, which is undoubtedly healthy in the long term in economic terms, hence addressing inflation is a priority in this 2023 beyond the pain of falling prices.

What's in store for Bitcoin is a question we would all like to know in full, however, we must be clear that the international reality does not allow Bitcoin to suffer except in relation to price, as we are in the presence of an overheated market with low productivity which is further compounded by inflationary pressures, as supply is currently outstripping demand.

So if prices fail to stabilize soon we will be seeing much stronger economic contractions for BTC than we have seen so far, so we haven't hit bottom yet, but for that not to happen, international inflation needs to slow down as soon as possible.

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