Bitcoin is experiencing its best January since 2013, with a 40% increase in value since the start of the year. This first-month growth surpasses previous years, with only two Januarys performing better, both in the early days of cryptocurrency. Other digital assets have also seen growth, with CoinGecko reporting a $280 billion increase in January.
Revived Risk Appetite
The improvement in Bitcoin’s value is part of a wider trend in risk appetite, as central banks are expected to slow down interest rate hikes and possibly even reduce borrowing costs later this year as inflation levels moderate. Despite ongoing turmoil in the industry, such as the bankruptcy of Genesis Global Holdco LLC and industry layoffs following the collapse of the FTX exchange, Bitcoin’s rally has persevered.
Noelle Acheson, author of the “Crypto is Macro Now” newsletter, believes that January feels like a month of fresh starts. Bankruptcy proceedings, corporate restructurings, and market fundamentals all point towards the bottom being behind the industry.
Skepticism Remains
Despite the positive outlook, there are still those who doubt the sustainability of the rebound in crypto and tech stocks. Bank of America strategists led by Michael Hartnett warn that the comeback of speculative assets such as Bitcoin and the Ark Innovation ETF may reverse if consumer prices, wages, and oil experience an upward shift, changing the narrative of a “soft landing” to a “no landing” scenario.
Federal Reserve Chair Jerome Powell may remind investors that interest rates will remain elevated for some time and expect a quarter-percentage-point hike this week.
Warnings Ahead
Some parts of the global market are also showing warning signs. Hedge funds have established the largest bearish bet on bond futures on record, contradicting the notion of a peak in rate hikes.
Despite the uncertainty, momentum continues to drive the market. Rick Bensignor of Bensignor Investment Strategies predicts that Bitcoin will reach $25,000, a level last seen in August.
While there are still skeptics and warning signs in the market, Bitcoin’s January performance and growth in other digital assets suggest a newfound confidence in the industry. As momentum continues to drive the market, only time will tell if this rebound will last.
