Cryptoverse: Big investors edge back to bitcoin
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[January 31, 2023] By
Medha Singh and Lisa Pauline Mattackal
(Reuters) - Big investors are dipping their toes into crypto waters
again after a bumper month for bitcoin.
Digital asset investment products, often favored by institutional
investors, saw inflows of over $117 million last week, the biggest
weekly increase since last July, according to data from asset manager
CoinShares.
Bitcoin was far and away the biggest draw, with funds tracking it
responsible for $116 million of that. Crypto funds' total assets under
management have risen to $28 billion, up 43% from lows plumbed in
November as the collapse of the FTX exchange sent shockwaves through the
industry.
"For the most part, people are more confident than they were a month
ago," said Joseph Edwards, investment adviser at Enigma Securities.
Bitcoin, the original cryptocurrency, has soared nearly 40% in January,
closing in on its best monthly performance since October 2021 and its
second-best January in the past 10 years.
![](http://archives.lincolndailynews.com/2023/Jan/31/images/ads/current/maskeauction_sda_LUAL_2022.png)
The rally, combined with a possibly brightening macro picture, has some
investors hoping the long crypto winter might finally be verging on
spring. Many investors expect the U.S. Federal Reserve to hike its
benchmark rates by 0.25% this week - the smallest rise since their
tightening cycle began last year.
"If peak inflation is indeed behind us for now, then long-term interest
rates may move lower as we approach the end of the inflation-focused
rate-hiking cycle," analysts at Fidelity Digital Assets wrote.
"This could signal positive momentum on the macro front for assets such
as bitcoin."
Activity in the options market indicated traders were rushing to place
bets just after the Fed meet, a sign of the importance the market is
placing on it, crypto liquidity provider B2C2 said.
Crypto trading volumes are also rising, according to CoinShares, with
average weekly volumes up 11%, indicating traders are returning after
months of dampened activity.
Still, crypto's not out of the woods by a long stretch, and the Fed
could still spoil the party if they take a more hawkish tone this week.
Crypto data platform Coinglass's bitcoin Fear & Greed index - where 0
indicates extreme fear and 100 extreme greed - is hovering at 61, the
highest level since mid-November 2021, just after bitcoin began
retreating from its peak.
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![](../images/013123PIX/busine46.jpg)
A representation of virtual currency
Bitcoin is seen in front of a stock graph in this illustration taken
January 8, 2021. REUTERS/Dado Ruvic/File Photo
![](http://archives.lincolndailynews.com/2023/Jan/31/images/ads/current/rbctowing_quarter_LUAL_2022.png)
"We might see a drop off next week or two, how deep that drop goes
is questionable," Edwards said.
BITCOIN 'DOMINANCE'
Nonetheless, there are also other signs that the end of the bear
market might be nigh, according to analysts at exchange Bitfinex.
They said shorter-term investors were selling their bitcoin at a
profit, while longer-term "HODlers" were still sticking with their
coin and not contributing to selling pressure.
"The realised profit and loss for the entire market has been
recorded as positive in January 2023 for the first time since April
2022, a continuation of this trend would signal the final stages of
a bear market," they said.
Additionally, bitcoin's "dominance" or share of the total crypto
market has hovered around 41% this month, levels not seen since last
July. Analysts at Citi said this mimicked a similar jump in bitcoin
dominance in April 2019, when a bitcoin rally marked a crypto market
bottom.
Other market watchers said stocks, another relatively risky asset
class, would likely drive bitcoin prices in the next week,
particularly the performance of interest rate-sensitive tech stocks.
Bitcoin's correlation with the Nasdaq is at 0.94, the highest since
May 2022, where a measure of 1 indicates the two are moving in
lock-step.
![](http://archives.lincolndailynews.com/2023/Jan/31/images/ads/current/culligan_sda_HFH_2022.png)
Late in November, bitcoin broke its bonds with stocks and traded
with a negative correlation of 0.7.
"It's possible that bitcoin could reach the next resistance level of
$25,200 in the coming weeks," said Rachel Lin, CEO of exchange
Synfutures. "Even if bitcoin ends up down again, there is a decent
chance it will achieve a higher low on the larger timeframe."
(Reporting by Lisa Pauline Mattackal and Medha Singh in Bengaluru,
Alun John in London; Editing by Pravin Char)
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