AI Crypto Tokens Gather Momentum

With the raging success of ChatGPT and stable diffusion, AI has been burst into the cultural zeitgeist in 2023. When creativity and speculation collide, there will be crypto tokens to speculate upon.

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AI Basket Outperformance

Looking at a basket of the largest AI based tokens (mainly narrative) by market cap, we can see significant outperformance over the wider crypto markets and majors such as Bitcoin and Ethereum. This is obviously fuelled by rampant speculation but the momentum is clearly there and has been catching a strong bid since the crash in mid November 2022. One of the largest tokens by market cap is Fetch.Ai, yet it still only trades at a valuation of approx. $200 million USD highlighting just how small this nascent group of tokens are within the crypto space. Whilst we acknowledge there is a great opportunity in this developing category, we urge our readers to proceed with caution, a lot of macro and industry headwinds still face the wider crypto markets and can cause huge downside volatility should they come into play. A final note is that the incredible performance has been fuelled by retail speculation, should the narratives and attention shift elsewhere, prices can get corrected quickly.

Cooling Inflation Can Supercharge Risk Assets

US inflation data is set to be released on Friday at 12:30am AEDT. Given the fact that crypto and US equity markets have shown some strength to start the year, an inline with expectations inflation print can send these markets much higher. FED chairman, Jerome Powell has been quite strong in his message of getting US inflation down to 2% and will use whatever monetary policy tools at his disposal to achieve said goal. With that in mind, if inflation was to come down to start the year, this can be seen as a potentially bullish signal as rates can normalise and markets can digest a stable rate environment. As always, we heed caution though as an uptick in inflation can send markets sharply lower, as traders position for more rate hikes.

BTC/USD Key Levels

Bitcoin has started to put in work and is tracking above our key level of $17,300 USD. Should we manage to close above this key level on the daily chart, we will look for a sustained rally towards $18,217 especially if inflation data out of the US is inline with expectations. If momentum is particularly strong and we break and close above $18,217, a retest of $19,673 by end of week cannot be ruled out. To the downside, watch for a daily close below $17,300 as it can cause a retest of the key support of $16,500. This will be critical to hold to prevent a deeper corrective move.

ETH/USD Key Levels

Ethereum has just retested our key level of $1,341 USD which was highlighted in our previous Morning Note. Should we close above $1,341 on the daily chart, we will look for a move towards $1,472, in the case that $1,472 gets broken, watch for a continuation towards $1,555 before major resistance comes into play. To the downside, if we fail to close above $1,341 and close below $1,261, watch for a retest of $1,190. Should $1,190 fail to hold, major support comes into play at $1,090.

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