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Bitcoin (BTC) still faces “significant risk” in 2023 as macroeconomic conditions dictate price action.

That’s according to economist Lynn Alden, who warned in private comments to Cointelegraph that bitcoin remains bullish after January’s gains.

Alden: The BTC price floor is a “process”.

Optimism is on the rise across crypto as BTC/USD is broadly holding levels that are 40% higher than at the start of the year.

What the rest of 2023 might hold is still up for debate, however, and Alden suggests it’s naïve to think the good times will continue unchecked.

The reason, according to him, has to do with the United States lawmakers and the Federal Reserve System.

“I expect the BTC bottom to be a process,” he summed up about Bitcoin’s current state.

“BTC prices are highly correlated with liquidity conditions, and liquidity conditions have been improving since Q4 2022.”

That recovery has effectively removed any trace of FTX bearishness from the chart, with BTC/USD now hovering around its highest levels since mid-August.

“The FTX/Alameda collapse took the industry down in the second half of 4Q even as many other assets rallied (stocks, gold, etc.) and now it looks like BTC is getting a little over the top and back to where it was. it would have been without the collapse of FTX/Alameda,” Alden continued.

BTC/USD was trading around $22,600 at the time of writing, data from Cointelegraph Markets Pro and TradingView showed.

BTC/USD 1-Day Candlestick Chart (Bitstamp). Source: TradingView

“There is a significant danger ahead.”

However, what may be outside of that “rape” may be less palatable to the bulls.

Related to: BTC benchmarks are coming out of capitulation. 5 Things to Know in Bitcoin This Week

The Fed is currently conducting quantitative tightening (QT), removing liquidity from the economy to fight inflation after several years of massive liquidity injections that began in March 2020.

These are being mitigated by US domestic politics, but the status quo could eventually return to the kind of restrictive sentiment seen in Bitcoin’s bear market in 2022.

“There is significant risk to the second half of 2023,” Alden explained.

“Good liquidity conditions right now are partly because the US Treasury is reducing its money balance to avoid going over the debt ceiling, and that’s pushing liquidity into the financial system. So the Treasury offsets some of the QT that the Federal Reserve does. Once the debt ceiling issue is resolved, the Treasury will replenish its cash account, which will take liquidity out of the system. At that point, both the Treasury and the Fed will siphon liquidity from the system, creating a vulnerable time for risk assets in general, including BTC.”

If H2 proves to be Bitcoin’s reckoning, it will tie in with other warnings from market commentators regarding the 2023 crash.

As Cointelegraph reports, former BitMEX CEO Arthur Hayes has a much bleaker outlook for the year, thanks to Fed policy as well.

In the long term, however, Alden is confident that Bitcoin will eventually recover from its recent lows.

“I think this is a deep value accumulation zone for BTC from a 3-5 year perspective, but traders should be aware of liquidity risks in the second half of this year,” he concluded.

The views, thoughts and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.