Bitcoin and other major cryptocurrencies started 2023 on a high note, rising to their highest values in months while US inflation remains mild. The impact of the collapse of the bitcoin exchange FTX has persisted, and the Biden administration has pressed Congress to regulate cryptocurrency marketplaces.
According to Bitalpha Ai, the first few weeks of February might be crucial in judging if the January rebound foreshadows brighter days coming in 2023 or is merely a bear market bounce.
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Crypto Market Performance in January
Bitcoin (BTC) prices fell to two-year lows around $15,600 in November when FTX filed for bankruptcy, but crypto recovered its swagger in early 2023. Bitcoin prices increased by more than 37% in January, closing at $22,900. Ethereum (ETH) prices increased 30% in January to $1,577 at the end of the month.
Solana (SOL) was the biggest January performance among the top ten cryptocurrencies by market value, gaining about 150%. With a 15% rise, XRP was the poorest performance. After Bitcoin and Ethereum had their worst yearly returns since 2018, the robust January performance has offered much-needed comfort for crypto investors.
Experts at easymarkets state that the rising interest rates sparked a crypto winter in 2022, resulting in a wave of bankruptcies in the crypto business and a drop in the value of several major cryptocurrencies. Bitcoin fell 64% in 2022, while Ethereum fell 67% in the same year. Bitcoin had its greatest January since 2013, when it gained 51%.
After the fall of FTX in November and December 2022, Bitcoin was shorted. In January, several short sellers were compelled to liquidate their bets and buy Bitcoin, sending the cryptocurrency’s price further higher.
Fears of crypto market contagion arose following the fall of FTX, particularly after crypto business BlockFi filed for bankruptcy protection on November 28.
Genesis, a cryptocurrency lender, became the next domino to collapse in the aftermath of FTX’s implosion in January. Genesis stated in its bankruptcy declaration on January 20 that it sustained significant losses on loans it made to Alameda Research and crypto hedge fund Three Arrows Capital, both of which filed for bankruptcy last summer.
Silvergate Capital (SI) shares fell 43% on January 5 after the business claimed it had to sell assets at a loss to meet $8.1 billion in client withdrawals. Silvergate announced $718 million in losses related to forced debt liquidation, substantially surpassing the bank’s total earnings.
Layoffs in the cryptocurrency market continued in January. Coinbase (COIN) announced 950 layoffs, while Crypto.com revealed it is cutting off around 20% of its personnel, the second wave of layoffs in the last six months.
Celebrities
Celebrities that backed cryptocurrencies and non-fungible tokens (NFTs) during the 2021 crypto bubble will be affected by the crypto winter.
Tom Brady of the Tampa Bay Buccaneers and music singer Madonna is among the celebrities facing class-action lawsuits related to their promotion of digital assets.
A court rejected a class-action lawsuit against reality TV star Kim Kardashian and boxer Floyd Mayweather in December, citing their sponsorship of the cryptocurrency EthereumMax. Kardashian previously paid a $1.2 million settlement to the Securities and Exchange Commission (SEC) for failing to properly disclose a $250,000 payment linked to an EthereumMax promotion.
On March 7, oral arguments in Grayscale’s case against the SEC will begin addressing the conversion of its popular Grayscale Bitcoin Trust (GBTC) into the first true Bitcoin exchange-traded fund (ETF).
Grayscale filed a lawsuit against the SEC in June 2022 after the agency denied its request to transform its Bitcoin trust into a spot crypto ETF, claiming market manipulation and a lack of oversight in the Bitcoin spot market.
February Crypto Market
In February, numerous major crypto market triggers will emerge that will determine whether or not the January rally will continue. The European Blockchain Convention will be held February 15-17 in Barcelona and will have over 200 presenters discussing the future of blockchain, NFTs, decentralized finance, and Web 3.
The annual Blockchain Life forum will also take place in Dubai on February 27-28. Markets for cryptocurrencies have been particularly susceptible to macroeconomic data and monetary policy choices. At the conclusion of its February 1 meeting, the Federal Open Market Committee (FOMC) boosted interest rates by another 25 basis points.
Crypto investors should keep a close eye on the Fed. Their decision will almost certainly boost the price of the cryptocurrency. If the Fed hikes rates faster or for a longer period of time than expected, crypto values might quickly reverse course and fall again.
However, if the Fed takes a total stop, the market will almost certainly continue to rise. The announcement of the January consumer price index (CPI) inflation data on February 14 and the January core personal consumption expenditures price index (PCE) inflation reading on February 24 may also cause considerable volatility in cryptocurrency markets.
Final Words
The beginning of 2023 was marked by a significant increase in the value of major cryptocurrencies. Despite the collapse of the crypto exchange FTX and pressure from the Biden administration to regulate cryptocurrency markets, the crypto market saw a strong performance in January.
Bitcoin (BTC) prices increased by over 37%, while Ethereum (ETH) saw a 30% increase. Solana was the top performer among the top ten cryptocurrencies, with a gain of 150%. The market was impacted by the collapse of FTX and other companies, leading to layoffs and decreased investments.
Celebrities who had backed NFTs and cryptocurrencies are also facing class-action lawsuits. February will be a crucial month in determining the future of the crypto market, with key events such as the European Blockchain Convention and Blockchain Life Forum.
Investors should keep a close eye on the Fed’s actions and inflation data to make informed investment decisions. What the future holds for the crypto industry will have to wait and be seen.
