Despite several critical indications indicating a bull run, analysts are split.
The world economy has weakened for a year. On Jan. 19, the U.S. government reached its “debt limit,” the maximum amount it can borrow to support federal operations, raising worries of greater financial suffering and an economic downturn.
UK struggles too. In 2022, 22,109 companies went bankrupt, up 57% from the year before and the highest rate since 2009. The International Monetary Fund also predicted that the UK will be the only G-7 member to enter recession this year.
Despite this damage, the crypto market has gained momentum during the previous month. This sector’s overall capitalisation rose 32% to $1.1 trillion in January. After stagnating at $16,500 for much of November and December, Bitcoin soared above $24,000 on Jan. 30.
The asset’s percentage of the market’s total cap reached 44.82% lately, its highest since June last year. As a short fix, investors should reduce their altcoin exposure and invest in BTC.
Since Jan. 20, Bitcoin has maintained a $22,500 price objective and a 40% 30-day profit ratio. After three years of rigorous COVID-19 limitations in China, the stock market surged, mirroring this increase.
According to financial services provider Matrixport, American institutional investors represent for 85% of recent Bitcoin accrual operations, demonstrating that mainstream participants are not ready to leave the digital asset market. Thus, Cointelegraph contacted Timothy T. Shan, chief operating officer of Avalanche-based decentralized exchange Dexalot, to better grasp the industry’s future. He said: “I think the current rebound in Bitcoin has been a nice surprise considering all the negative news in the business that is still to be completely played out. However, this gain is unsustainable and consumers can expect additional volatility.
Frederic Fernandez, co-founder of DeFi trading program DEXTools, told Cointelegraph that the new year might be good for the crypto market if the global economy recovers. A large-scale trend reversal might stimulate alternative investment demand and market liquidity.
“Restrictive restrictions may keep the market gloomy if economic uncertainty rises. However, if Bitcoin reaches $25,000, that might improve trust and acceptance of cryptocurrencies, leading to further investment and broad adoption,” he noted.
Deribit’s chief business officer, Luuk Strijers, believes the crypto industry is improving. He told Cointelegraph that the market is again in a “contango,” when the futures price of an item is greater than its spot price. When an asset’s price rises, a contango is shown.
BTC’s 25-Delta put skew has dropped from 30% to zero, a positive sign. Analysts can use the aforementioned statistic to anticipate asset price movements and volatility. “A decline in 1-Month Skew means the shorter-dated out-the-money calls are growing more costly relative to the out-the-money puts, which is a positive indication,” Strijers said.
He also noted that open interest in Bitcoin and Ether options has been building again, which is encouraging given that much of this momentum was lost following last year’s massive year-end expiry.
Strijers also noted that the options market’s put-call ratio (PCR) achieved a local bottom late last month, suggesting investors may be warming up to digital assets again. PCR is used to gauge options market sentiment.
Digital-asset investment products received $117 million in capital in the last week of January, the most in 180 days. $116 million was invested in BTC-related offerings.
On Jan. 30, digital investment product volume reached $1.3 billion, up 17% year-to-date. According to Coishares, short-Bitcoin instruments saw $4.4 million in inflows, which is bad for investor sentiment.
For the third month, multi-asset investment vehicles lost $6.4 million. According to Coinshares, this shows investors are shifting toward proven crypto assets.
Finally, the crypto fear and greed index, which helps investors assess market mood, is 60. This level symbolizes “greed,” or consumers buying digital assets in anticipation of greater bullish traction.
Shan thinks the Federal Reserve is near to its terminal rate goal—the neutral interest rate where prices are steady and full employment is achieved—which is now little above 5%. He expects the Fed to maintain this figure throughout the year and predicts a slight recession that won’t hurt the crypto market.
He said that tough restrictions, if implemented properly, may boost the industry. “Good rules will open the way to mainstream adoption over the next 10+ years, so the business might develop exponentially,” Shan added.
In his opinion, the harsh selloff, fraud, over-leverage, insufficient controls, and governance during the past year have reset the crypto economy. They can teach the industry to operate properly and grow sustainably.
Thus, with Bitcoin and other big cryptos making a tiny recovery, it will be intriguing to observe how the digital currency market evolves in a future of rising economic instability.
