January recap: Bulls back on top, but all eyes on the Federal Reserve

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key takeaways

  • Crypto Banks Best January in Nearly a Decade
  • 68% of bitcoin supply in profit compared to 50% in early January
  • The correlation between bitcoin and risk-on assets is near all-time highs, with the Federal Reserve’s interest rate policy leading

Gotta celebrate victory, huh? And wow, did crypto investors need a win. After a year filled with bankruptcies, arrests, layoffs and red charts, the new year is off to a good start.

In fact, January is the best month for crypto since 2013. Let’s dive in and take a look at the summary stats from the banner month, and get the lay of the land as we turn the page on February.

money rate positive

Starting the month at $16,600, bitcoin closed January trading at $23,100 with a 39% gain.

The funding rate is the price traders pay to go long or short an asset in the futures market. If the funding rate is positive, it means that long trades are dominant and long traders are paying short traders for the positions. The opposite also holds, meaning that a negative funding rate means that short traders are underpaying long traders.

This means that, although it is not perfect, it is a good gauge of market sentiment. Looking at the rate throughout January, it was positive on all days except two days as the bulls ruled the roost.

bitcoin traders are back in profit

The best way to sum up the fortunes of the crypto market this month is to look at the amount of supply in profit. Things ended last year quite acrimoniously, with half of bitcoin’s 19.3 million circulating supply in profit.

Fast forward 31 days and that figure is now 68%.

the road is long behind

Of course I wrote yesterday How severe was the damage done in 2022. This is not a case of a little gentle care turning around the fortunes of the market. The industry is still beset by bad news, with layoffs and bankruptcies a long way off if the past few weeks are anything to go by.

Crypto, more than ever, is only following the macro. There is no other reason for this rally. And with the US Federal Reserve meeting this afternoon to outline its latest interest rate policy, the bounce could very quickly be reversed, or even extended, based on the words of Chairman Jerome Powell.

relations remain sky-high

Don’t take my word for it. A quick look at the correlations at play here shows just how much Jerome Powell is holding Bitcoin’s hand.

There is an irony somewhere; A group of crypto traders are anxiously awaiting word from a central bank president on where bitcoin and the rest of the market are headed. what was it a hedge story,

And if the correlation between the market and bitcoin was bullish, you can bet your lower satoshis that it is even more so between bitcoin and the rest of the market. The Fed has been tightening the hand of bitcoin ever since we entered this new era of increased interest rates around April 2022, and bitcoin is holding the hand of every other crypto.

final thoughts

It’s been a great month for cryptocurrencies, reminiscent of the explosive runs it was able to deliver back in the good old days of the bull market.

With the Federal Reserve announcing its latest interest rate policy this afternoon, the market could show volatility with this latest rally, with sudden cuts both on the cards, depending on the tone of Chairman Jerome Powell’s attack.

In the longer term, the space is still reeling from the many negative events of the past year, and bitcoin trading like leveraged bets on the Nasdaq is far from ideal.

Despite looking like a fundamental commodity and dreaming big about the future, bitcoin remains a highly speculative asset for now. And for the rest of the crypto? Just copy and paste the bitcoin analysis, turning the volatility up a notch (or three).

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