Cryptoverse: Big investors edge back to bitcoin

Jan. 31 (Reuters) – Large investors are once again stepping into the crypto sea after Bitcoin’s tumultuous month.

Digital asset investment products, often favored by institutional investors, saw more than $117 million in inflows last week, the biggest weekly increase since July last year, according to data from asset manager CoinShares. rice field.

Bitcoin is by far the biggest trigger, with $116 million in tracked funds. Total assets under management for crypto funds reached $28 billion, up 43% from a steep November low as the collapse of the FTX exchange shocked the industry.

“For the most part, people are more confident than they were a month ago,” said Joseph Edwards, an investment adviser at Enigma Securities.

Bitcoin, the original cryptocurrency, surged nearly 40% in January, approaching its best monthly performance since October 2021 and its second-best January in the past decade.

This rally, perhaps coupled with a brighter macro picture, has some investors hoping that the long crypto winter is finally approaching spring. Many investors expect the US Federal Reserve to raise its benchmark interest rate by 0.25% this week.

Analysts at Fidelity Digital Assets said: “If the peak of inflation has indeed passed, long-term interest rates could fall as we approach the end of an inflation-focused rate hike cycle.

“This could indicate positive macro momentum for assets such as Bitcoin.”

B2C2, a crypto liquidity provider, says activity in the options market shows traders rushing to place bets in the immediate aftermath of the Fed meeting, indicating the market is taking the options market seriously. .

Cryptocurrency trading volumes are also on the rise, according to CoinShares, with average weekly trading volumes up 11%, indicating that traders are returning after months of sluggish activity.

Still, cryptocurrencies aren’t out of the woods for the long term and could ruin the party if the Fed takes on a more hawkish tone this week.

Crypto data platform Coinglass’ Bitcoin Fear & Greed index (where 0 indicates extreme fear and 100 indicates extreme greed) hits its highest level since mid-November 2021, just after Bitcoin began to retreat from its peak. It remains at level 61.

“We may see a drop in the next week or two, but the question is how long that drop will last,” Edwards said.

Bitcoin “dominance”

Nonetheless, there are other signs that the end of the bear market may be near, according to analysts at exchange Bitfinex. They said that short-term investors are selling bitcoin and making profits, but long-term “HODlers” are still sticking to bitcoin and are not contributing to the selling pressure.

“Realized gains and losses across markets were recorded as positive in January 2023 for the first time since April 2022. A continuation of this trend would mark the final stage of the bear market,” they said.

Additionally, Bitcoin’s “dominance” or overall crypto market share has hovered around 41% this month, a level not seen since July last year. A Citi analyst said he mimicked a similar spike in Bitcoin dominance in April 2019 when Bitcoin’s rise bottomed out in the cryptocurrency market.

Other market watchers said the performance of another relatively riskier asset class, equities, especially interest rate-sensitive technology stocks, is likely to drive bitcoin prices next week.

Correlation between Nasdaq and Bitcoin (.IXIC) is 0.94, the highest since May 2022, and measurement 1 indicates that the two are moving in lockstep.

In late November, Bitcoin broke its ties with stocks and traded at a negative correlation of 0.7.

“Bitcoin could reach the next resistance level of $25,200 in the coming weeks,” said Rachel Lynn, CEO of exchange Synfutures. We have a good chance of hitting higher lows in the frame.”

Reporting by Lisa Pauline Matakkal and Meda Singh of Bengaluru and Arun Jong of London. Edited by Pravin Char

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