Bitcoin near-record January: crypto market grows by US$280 billion

Bitcoin is on track to close out its best January since 2013 amid bets that monetary tightening campaigns and the crypto sector crisis are easing.

The largest token by market value is up 40% in 2023, a figure for the first month of the year only surpassed twice when the industry was in its infancy.

Bitcoin was down more than 2% on Monday and was back near US$23,000.

Other smaller coins such as Solana, Axie infinity, and Decentraland have doubled in value, part of a US$280 billion surge in the crypto market, according to figures from CoinGecko.

The rebound from last year’s deep drop is part of a broader revival in risk appetite on expectations that central banks will slow interest rate hikes and perhaps even cut them later this year as high inflation moderates.

The virtual currency rally has weathered the fallout from the collapse of Sam Bankman-Fried’s FTX exchange, such as the bankruptcy of cryptocurrency lender Genesis Global Holdco LLC and a series of layoffs across the sector.

January “looks like a month of new beginnings, with emerging clarity on bankruptcy proceedings, corporate restructurings, and market fundamentals pointing to the fact that we’ve already hit bottom,” wrote Noelle Acheson, author of the “Crypto Is Macro Now” newsletter.

Still, many skeptics doubt the rally in stocks like cryptocurrencies and tech stocks will be long-lasting.

One risk is that the soft economic landing markets are hoping for is fanciful, as rates should continue to rise and stay there for longer.

The rally in speculative assets such as Bitcoin and the Ark Innovation ETF “will likely reverse” if oil, wages, and rising consumer prices temporarily change the “soft landing” narrative in the coming weeks to a “no landing” view, Bank of America Corp. strategists led by Michael Hartnett said last week.

Fed Chairman Jerome Powell may also remind investors that policymakers plan to keep rates elevated for some time. His speech will follow what is expected to be a slower rate hike of 25 basis points this week.

Some corners of global markets are also issuing warnings. For example, hedge funds have made the biggest bearish bet on bond futures on record, which clashes with the idea that rate hikes are close to reaching their peak.

For now, momentum is king. Rick Bensignor of Bensignor Investment Strategies targeted US$25,000 for bitcoin in a note Monday, a level it last reached in August.

With information from  Bloomberg

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