LMAX Digital volumes held up rather well on Monday considering the New Year’s holiday trade. Total notional volume for Monday came in at 166 million, just 3% below 30-day average volume.

Bitcoin volume printed $78.5 million on Monday, 25% below 30-day average volume. Ether volume came in at $35.75 million, on pace with 30-day average volume.

Looking at average position size over the past 30 days, we’re seeing average bitcoin position size at $4,274 and average position size for ether at 1,666.

Volatility has been anemic in 2022, and after seeing a little pick-up in recent weeks, we’re right back down to yearly low levels. We’re looking at average daily ranges in bitcoin and ether of $305 and $36 respectively.

We’re finally out of the gloomy year that was 2022, a year which resulted in major setbacks in the prices of bitcoin and ether to the tune of 64% and 67.5% respectively. Looking back, the initial weakness as the year got going was mostly on account of a market that was well overbought into the end of 2021 and warning of the need for a very healthy pullback in early 2022.

But as the year progressed, there were other major factors at play which continued to result in downside pressure. One of those factors was the state of the global economy – namely, a developing trend of rising inflation forcing central banks into more aggressive, less investor friendly policy moves. And so, with crypto still correlating with risk assets as a new emerging market, the deterioration in global sentiment directly translated to downside pressure on crypto.

Of course, another major factor contributing to weakness in crypto was the round of blowups in the space culminating with the implosion of FTX into the end of the year. These events sent shockwaves through the market and cast a shadow over all of the positive momentum that we were seeing in the space to that point.

As we look ahead to how things will play out in 2023, we believe all of these factors will continue to play a major role in dictating the direction of the market. For now, we still see risk associated with rising inflation and aggressive central bank responses. We still risk associated with fallout from the FTX collapse (will be interesting to see what comes of DCG and Genesis). And we also see risk associated with regulatory response, particularly if all of the recent events trigger an overly aggressive and counterproductive response that ends up stifling potential within the nascent asset class.

Ultimately however, the medium and longer-term outlook remains highly encouraging. Beyond what could be one more round of healthy setbacks in H1 2023, we see plenty of demand coming back into play, and we see investors stepping in and building exposure at discounted prices. We believe regulators have done a good job taking their time in getting to know the asset class, and as such, we remain optimistic that regulators will get it right when they finally do step in to offer much wanted clarity.

If we forget about price for a moment, one of the most encouraging developments of 2022 was the ongoing wave of institutional adoption in the space. These are players that make long-term decisions to commit to an asset class when they finally do decide to commit. And we saw a lot of these commitments from major players in 2022. So while the first half of 2023 could still be bumpy, we are optimistic that things should start looking up again well before the year is out.