Bitcoin is poised for its best January since 2013 amid bets that both monetary tightening and the crypto sector crisis will ease.
The largest token is up over 40 percent since the turn of the year, a first-month gain surpassed only twice previously when crypto was in its infancy. Minor coins like Solana, Axie Infinity and Decentraland have doubled in value, part of a total surge in digital assets of $280 billion (around 22.8 lakhcrore) in January, figures from CoinGecko show.
The recovery from last year’s deep slide is part of a broader rebound in risk appetite on expectations that central banks will slow rate hikes and perhaps even cut borrowing costs later this year as high inflation eases.
The virtual coin rally has weathered the lingering fallout of Sam Bankman-Fried’s collapse FTX Stock market – like the bankruptcy of crypto lender Genesis Global Holdco LLC and a string of layoffs across the industry.
January “feels like a month of new beginnings, with clarity emerging on bankruptcy proceedings, corporate restructuring and market fundamentals suggesting the bottom is behind us,” wrote Noelle Acheson, author of the Crypto Is Macro Now newsletter. .
Still, there are many skeptics who question whether the rebound is that good crypto and tech stocks will last. One risk is that the economic soft landing that markets are hoping for is being fanciful because rates need to stay high for longer.
The comeback of speculative assets such as Bitcoin and the Ark Innovation ETF “likely to reverse” as oil, wages and consumer price hikes temporarily shift the “soft landing” to a “no landing” view in the coming weeks, strategists at Bank of America Corp said. led by Michael Hartnett last week.
Federal Reserve Chair Jerome Powell may also remind investors that officials plan to keep interest rates elevated for some time. He will be speaking following an expected Fed downgrade to a quarter-point hike this week.
Warnings are also flashing in some corners of global markets. For example, hedge funds have set up the largest bearish bond futures bet of all time, which clashes with the narrative that a peak in rate hikes is near.
Right now, momentum is king. Rick Bensignor of Bensignor Investment Strategies targeted $25,000 (about 20 lakh) for Bitcoin in a note Monday, a level last seen in August.
Bitcoin is down about 1 percent to $23,640 (about 19.2 lakh) as of 11:30 a.m. Monday in Tokyo. It’s on track for its best month since December 2020. Ether, the second largest token, has held steady at around $1,635 (roughly 1.3 lakh).
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