January recap: Bulls back on top, but all eyes are on the Fed

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• Best Crypto Banks in January for nearly a decade
• 68% of the bitcoin supply is in earnings, compared to 50% at the beginning of January
• Correlation between Bitcoin and risk assets near all-time high, as Fed interest rate policy continues to hold the key

It’s important to celebrate winning, right? Wow, did cryptocurrency investors need to win. After a year littered with bankruptcies, arrests, layoffs and red graphs, the new year is off to a nice little start.

In fact, January is arguably the best month for cryptocurrency since 2013. Let’s dive in and look at summary stats from the banner month, and get a head start as we turn the page to February.

The financing rate is positive

Opening the month at $16,600, bitcoin closed January trading at $23,100 for an impressive 39% gain.

The financing rate is the price that traders pay to long or short the asset in the futures market. If the funding rate is positive, it means that long trades are in control and long traders are paying short traders for positions. The reverse is also true, which means that a negative funding rate means that short traders pay out traders in long positions.

This means that although it is far from perfect, it is a good gauge of market sentiment. Looking at the rate throughout January, it was positive on all but two days, as the bulls took control.

Bitcoin traders are back in profit

The best way to sum up the fortunes of the cryptocurrency market this month is to look at how much bid is in profit. Things ended sharply last year, with half of the circulating supply of bitcoin earning 19.3 million.

Fast forward 31 days and that number is now up at 68%.

The way back is long

Of course I just wrote yesterday about how severe the damage will be in 2022. That is not the case with little care turning market fortunes around. Bad news continues to surround the industry, with layoffs and bankruptcies far from over, if the past two weeks are anything to go by.

Encoding, more than ever, is simply following the macro. There is nothing else causing this assembly. And with the US Federal Reserve meeting this afternoon to clarify its latest interest rate policy, the rebound could be reversed very quickly, or even strengthened further, depending on the words of Chairman Jerome Powell.

Correlations are still high

Don’t take my words seriously. A quick look at the links here shows how far Jerome Powell is holding Bitcoin’s hand.

There is an irony in there somewhere. A large number of cryptocurrency traders are nervously awaiting the central bank chief’s words to find out where Bitcoin and the rest of the market are heading. What was that about file Hedge listing?

And if the correlation between the market and Bitcoin is sharp, you can bet it is even higher between Bitcoin and the rest of the market. Since we moved into this new era of rising interest rates around April 2022, the Federal Reserve has been holding Bitcoin’s hand more firmly than ever before, and Bitcoin has been holding the hand of every other cryptocurrency.

Final thoughts

It was a stellar month for cryptocurrency, as it threw back memories of the explosive flows that could have brought back the good old days of the bull market.

With the Federal Reserve announcing its latest interest rate policy this afternoon, markets could show volatility, with momentum for this latest rally, along with a surprise cut, both on paper depending on the tone Chairman Jerome Powell hits.

In the long run, the space is still reeling from the many negative events of the past year, and bitcoin trading like leveraged betting on Nasdaq is far from ideal.

Even though the fundamentals look similar to a commodity, and big dreams about the future, Bitcoin remains a highly speculative asset for the time being. What about the rest of the cryptocurrencies? Simply copy and paste your Bitcoin analysis, with volatility up by a notch (or three).