From the Tiger’s Unrest to the Rabbit’s Respite: How 2023 Promises Calm and Confidence in Capital Markets

Madalena Thirsk, Associate Account Executive, Capital Markets

For centuries, since the 24th century B.C. to be exact, people have relied on the Chinese lunar calendar to predict their fortune for the year ahead.

Whether or not you believe in such predictions, following a chaotic and volatile year for capital markets, many will be relieved that the year of the rabbit promises the calm after the storm.

The Tiger’s disruptions:

2022, the year of the tiger, anticipated rapid changes and sudden disruptions. From a markets perspective, this prediction of volatility presented itself through inflationary pressures, interest rate hikes and geopolitical tensions. The year saw inflation rise to its highest rate since the early 1980’s, reaching 8.8%.

Need more proof? The return of volatility in the FX markets last year, driven by the Russian-Ukraine conflict, acts as prime example. For the first time in over a decade, almost all major currencies sharply depreciated against the US dollar.

As another case in point, crypto took the beginning of 2022 by storm, rapidly changing the global market as we knew it. And just as the year of the tiger foresaw rapid changes it also predicted sudden disruptions – FTX’s collapse in November 2022 rattled the crypto market, which lost billions at the time, falling below a $1 trillion valuation.

The collapse of FTX and the volatility endured by the FX market are representative of 2022’s disruptive nature. And with such disruption, comes change – this change taking the form of greater regulatory oversight. So instead of looking back at last year with a wince, we should see it as a catalyst for change, a shock to the system.

Hopping into a new year:

Surely everyone is familiar with the cautionary tale of the tortoise and the hare, slow and steady wins the race. Steadiness and security being especially important – and guaranteed by greater regulatory oversight. The year of the rabbit is associated with calmness and stability – and we can expect capital markets to follow suit.

2023 capital markets have already seen a surge in steadying regulatory initiatives. Across the FX market, the trend towards a more electronically traded landscape, promises increased oversight.

In the wake of the FTX collapse, there has also been a step-up in crypto regulation. The cogs have already been set in motion by the FCA, SEC, and other regulatory bodies. On the European side of things, MiCA is set to enter into force soon establishing an aligned set of crypto rules across the union.

Evidently, the crypto industry has entered the new year holding regulation’s hand. And many investors, both individual and institutional, feel more assured, protected and confident by the growing regulatory oversight of the crypto sector.

For those attracted to the crypto market’s decentralized nature and separation from formal financial institutions, greater focus on governance and regulatory standards, may not come as great news.

But a lot must be said for the already cooling levels of inflation, expected to fall to 6.6% in 2023, and growing market confidence providing optimism for a slowing monetary tightening, bringing more investors back to assets like digital currencies. The new year has also already seen the price of most cryptos stabilising as the market attempts to rebound from the collapse of FTX. The increase is slow but steady – and already, the global crypto market has recovered, yet again reaching a market valuation of $1 trillion valuation.

All in all, 2023 has been deemed crypto’s “recovery year”, with the year of the rabbit set to bring hope and prosperity.

The year of the rabbit has gifted us a much-needed stillness, presenting a unique opportunity for businesses to amplify their voice and effectively convey their message. To seize this moment, it is crucial for firms to prioritize effective communication and public relations. While the year of the rabbit has provided this window of opportunity, it remains uncertain whether the upcoming year of the dragon in 2024 will do the same. So really, it’s now or never, it is in best interest of firms worldwide to consolidate messaging and build traction through communications and PR.

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