Bitcoin Closes its Best January in 10 Years: Will the Rally Continue?

“The month is shaping up to be a month of new beginnings, with clarity emerging regarding bankruptcy proceedings, corporate restructurings and environmental safeguards. market fundamentals that indicate we have already hit bottom.“, points out Noelle Acheson, cryptocurrency expert and author of” Crypto Is Macro Now “. And despite the bankruptcy of Genesisthe latest victim of the spillover effect caused by the collapse of FTX, or the avalanche of layoffs in the sector, risk appetite has returned to the market.

This was made possible thanks to the good macroeconomic reading published in recent weeks, in particular the December inflation data y the personal consumption deflator (PCE) for the same month. This gave hope to the market, which expects the Federal Reserve (Fed) to slow the pace of rate hikes.. Thus, the consensus estimates that on February 1, the central bank will increase its rates by 25 basis points.

“This more modest increase partly explains the rise in prices of many cryptocurrencies. This is seen as a positive economic signal and it drives up the demand for bitcoin, which… Has been positively correlated with equity markets in recent years.. The drop in the rate is a bullish sign for the stock market,” says Joe DiPasquale, CEO of BitBull Capital.

However, not everyone feels the same. Neil Wilson, chief market analyst at Markets.com, thinks there is a a clear divergence between market and Fed thinking.. “Futures point to a Fed stop at 4.75% to 5%, 25 basis points higher in March after 25 basis points on Wednesday (February 1). Markets are also expecting reductions later this year. But Federal Reserve officials, according to the dot chart, estimate that the terminal rate will be well above 5% and will remain there throughout the year. 2023″, he explains.

“I think investors are underestimating the magnitude of the problem and that…”. a terminal level of 6% is eminently possible.. At the end of the day, I think they’ll prefer to cut the rate to 25 basis points on Wednesday, but that’s not the same as stop and pivot,” adds Wilson, who believes that despite the signs of economic slowdown, the question is “to what extent the Fed will be guided by a shrinking economy if inflation remains too high”..

“So far, the Fed has made it clear that will fight inflation no matter what, and I don’t think that will change.It can and will review weak economic data until inflation is brought under control,” he said.

Also, as reported by “Bloomberg”, Hedge funds have made the world’s biggest ever bearish bet on bond futures.This contrasts sharply with the idea that rate hikes are about to peak.

Naeem Aslam, chief market analyst at AvaTrade, goes in this direction, pointing out that. “We are not out of the inn nor can we say that the crypto winter is over. ». For this expert, although the sector is “coming back to life”, there is still a long way to go before we can speak of a full recovery. because “many market participants believe that the bearish cycle is not yet completely over”.

” The price It must exceed the 30,000 dollar mark, which is far from won at the moment.y. This will be enough to establish that prices are moving in the right direction to see a bullish rally,” he adds.

Other analysts, such as Matt Weller, global head of research at FOREX.com, point to the fact that much of these rallies are due to rising inflation. FOMO (fear of missing something). “Traders thought they would have all year to buy near the lows. Now that we are starting to see prices rise, we are starting to see a lot of these traders throwing in the towel and jumping in to make sure they don’t miss the big rally from the low we are seeing now.“, he noted.

At the same time, the Bank of America (BofA) team noted that the rally in bitcoin and other speculative assets “is likely to reverse”. whether wages, oil prices and other relevant indicators change the current narrative that a soft landing for the economy is possible. In addition, a New York Bank investigation shows that nearly two-thirds of fund managers believe bitcoin will end 2023 below $20,000..

Meanwhile, Edward Moya, senior market analyst at Oanda, notes that “for cryptocurrencies to have any underlying support, given all the regulatory and contagion fears, the eInflation risks must disappear“. “Bitcoin has massive resistance at the $24,000 level, so if risk aversion continues, the bearish momentum may not find significant support until the $21,000 region,” he adds.

“If we’ve learned one thing from this bear market, it’s that. everyone in the centralized space has been lying about what they own, what is backing their “tokens” and how much leverage they have.“Teeka Tiwari, an analyst with the Palm Beach Research Group, thinks the Genesis bankruptcy could trigger a cascading effect on the Digital Currency Group and dropping bitcoin to $9,000 or $12,000.. “We didn’t want to stay there long, but it’s a possibility,” he concludes.