BigONE Insights: Assessing The January Pump
The market is currently looking up, with both the NFT and cryptocurrency markets seeing significant increases in trading volume, and price of digital assets. Since the FTX debacle, which drove BTC to $16,000 in November, the price of Bitcoin has now fully recovered to its pre-November level, and cryptocurrency enthusiasts have interpreted this bounce as bullish for the cryptocurrency market in the long term. Many tokens are still 70–80% off their all-time highs, but with this new development, a lot could be expected this year in terms of cryptocurrency’s future. Different narratives, such as AI tokens, are beginning to take center stage with the emergence of OpenAI, as well as liquid staking derivatives. In this article, we would look at the factors that have contributed to the positive returns in the market so far, and the outlook for the future so far.
Reasons For The January Pump
Since the beginning of the year, the price of Bitcoin has risen for a variety of reasons, including CPI data and the inflation rate, among others. It is widely assumed that BTC bottomed out at $16k during the FTX situation, resulting in a rapid drop in the prices of digital assets. To begin, the positive CPI report from the Bureau of Labor Statistics (BLS), which showed overall inflation for all urban consumers declining by 0.1%, appears to be the primary catalyst for the rally.
Inflation has reached its lowest point since April 2020. Equities traders are also reacting by driving prices higher in the hope that the positive data will prompt the Federal Reserve to hike interest rates less aggressively at its meeting on February 1.
Furthermore, since Bitcoin reached a yearly high of $18,898 on January 12, some analysts believe the new BTC price floor is $18,000. Despite the fact that BTC trading volume has not yet recovered to pre-FTX collapse levels, the $41.9 billion in Bitcoin trading on January 12 represents a new yearly high. According to the CPI report, inflation fell for the sixth month in a row. One of the most significant decreases in the report was the sharp drop in gasoline prices. Both used and new car prices have dropped. A caveat is included in the CPI report: the cost of services and food has remained high.
Another encouraging sign for Bitcoin price, according to BigONE, is the weakening of the US dollar index (DXY). When the DXY falls in value, sentiment toward risk assets such as Bitcoin rises. The S&P 500, Dow Jones, and Nasdaq provide a broad view of the economy. The correlation coefficient between Bitcoin and the major stock indices is currently very high. As a result, if interest rates fall and the economy grows, Bitcoin may rise along with bullish equity markets. The higher the Bitcoin price, the better the macroeconomic climate.
The fear and greed index is also another important metric to consider, rising to its highest in four months is a catalyst for the bullish price movement of digital assets. There has also been mass adoption by industry leaders such as Blackrock, Fidelity, Mastercard, and enthusiasts who are hopeful this will continue well into 2023, and help to further propel the price of Bitcoin.
Outlook For Cryptocurrencies In 2023
BigONE believes that if CPI reports and other important metrics are positive, BTC and other altcoins should experience a strong rally. The issue of returning to all-time highs is still uncertain at the moment, so as with any investment strategy, it is critical to conduct thorough research, effectively manage risk, and make informed decisions, as BigONE would always advise. BigONE is a firm believer in the future of cryptocurrencies, and we will continue to work to make this a reality.