After a run of bad luck throughout much of 2022, Bitcoin closed January 2023 with its best performance since its October 21 rally. As of press time, Bitcoin is now trading at $22,910 per token – the highest it has been since August 2022.
According to market watchers, the past month was also the best January for cryptocurrency since January 2013.
What’s Been Happening?
According to options trader Christopher Newhouse of crypto market maker GSR, buyer-side demand from institutional takers brought major returns in the first two weeks of the new year, driving an initial run of short seller liquidations.
As a result, Bitcoin started the year with a great deal of price improvement following the release of the December CPI print. Indeed, twelve days after the December inflation report was released, around $1.3 billion worth of Bitcoin short positions were liquidated.
However, as the month progressed, Bitcoin began to move higher. In the period between January 10 and 20, momentum traders returned to the market, primarily driven by speculation. This helped spur Bitcoin out of the $15,700 to $18,000 range it has been stuck in for the past several months.
Newhouse likewise pointed out that Bitcoin’s drive over $20,000 and $22,000 happened on Fridays – days when dealers had a great deal of negative exposure, prompting them to sell as trading hours in the US drew to a close.
Taking Things with a Grain of Salt
However, some analysts are still advising caution when it comes to trading in Bitcoin as the crypto’s next moves may still be influenced by whether or not – and possibly how high – the Federal Reserve will be hiking interest rates yet again for this month.
Indeed, Oanda senior analyst Edward Moya opines that market trading stands to be very technical as volatility returns.
Likewise, things also stand to improve for cryptocurrencies in general as the dust has settled following the disastrous downfall of FTX and the arrest of its founder Sam Bankman-Fried. For Dexterity Capital co-founder Michael Safai, the worst has already happened, so he sees investors becoming more confident with regard to trading in crypto.
At present, the total market capitalization of cryptocurrencies stands at $1.05 trillion, reflecting an increase of around 24% year to date. On a global basis, crypto volume has risen by 61% since the start of 2023 and now stands at $5.5 trillion.