© Reuters Big Investors are back pouring money into Bitcoin
It seems that major investors have begun to return again to the cryptocurrency market, and this may have contributed to the positive performance of the price in January in the past ten years. This return came in light of the high hopes that the era of monetary tightening by the Federal Reserve is over. And the gradual fading of the negative effects of the collapse of the FTX inch and its repercussions on the level of confidence in the cryptocurrency industry around the world.
The main feature of these positive flows is that they are directed almost entirely towards Bitcoin, excluding other digital currencies. However, its impact is felt across the entire cryptocurrency market.
Investors prefer bitcoin
The investment volumes in encrypted digital assets, which are usually favored by major investors and institutional investors, have increased. Inflows exceeded 117 million last week, the largest weekly increase since last July, according to data from digital asset management firm CoinShares.
The lion’s share of this money flowing into the cryptocurrency markets was bitcoin. worth $115.6 million, and short Bitcoin, $4.4 million. While the flows on the currency amounted to 2.3 million dollars. And the currency of 1.1 million dollars, and the currency of which money came out worth 0.2 million dollars.
The total value of digital assets encrypted by these investment funds has risen to the level of $28 billion. An increase of 43% from its lowest level in November. After the collapse of the FTX stock exchange caused a huge shock that shook the corners of the entire industry.
Multi-asset investment products saw outflows for the ninth consecutive week totaling $6.4 million. Which indicates that investors prefer specific investments.
Investor funds from Germany were the main driver this week seeing 40% of all inflows ($46m). It is followed by Canada, the United States, and Switzerland, which saw $30 million, $26 million, and $23 million, respectively.
Joseph Edward, investment advisor at Enigma Securities, told Reuters: “In general, people are more confident – in the market – than they were a month ago.”
The direction of market movement is linked to the Fed’s decision on interest rates
The price of bitcoin rose by nearly 40% in January, recording its best monthly performance since October 2021 and the second best monthly performance in January since 2013, according to Coinglass data. This increase is in addition to an improvement in the general picture of the overall economy, with the beginning of a decline in inflation rates. Thus, the hope is to reduce or reduce monetary policy tightening by the US Federal Reserve.
This has given investors hope that the cryptocurrency fall is finally coming to an end. Many analysts expect the US Federal Reserve to raise interest rates by 0.25% this week. It is the smallest rise since the start of the tightening cycle last year.
“If the peak of inflation is indeed behind us for the time being, long-term interest rates could drop as we approach the end of an anti-inflationary rate hike cycle,” said analysts at Fidelity Digital Assets. cryptocurrency such as Bitcoin.
In the options market, traders often rush to place their bets immediately after the release of the Fed’s meeting outcome report. It is a sign of the importance the market attaches to it.
Cryptocurrency trading volumes are also on the rise, according to CoinShares. Average weekly volumes increased by 11%, which is a sign that traders are back after months of lackluster activity. But despite all that, the risk remains that the Fed will reverse expectations this week and sound a more hawkish tone.
The Bitcoin Fear and Greed Index released by the cryptocurrency data platform Coinglass reached a level of 52 in mid-January – where 0 indicates extreme fear and 100 indicates extreme greed. It is the highest level since the beginning of April 2022, after Bitcoin started to retreat from its peak.
“We may see a decline in the next week or two. How deep this decline is is unpredictable,” Edward said.
Rachel Lane, CEO of Exchange Synfutures: “Bitcoin is likely to reach the next resistance level of $25,200 in the coming weeks.” “Even if Bitcoin ends up lower again, there is a good chance it will make a higher low on the larger timeframe.”
Bitcoin gains market capitalization
There are other signs that the end of the bearish wave may be near, according to analysts at Bitfinex. The recent declines in the Bitcoin price have been the result of speculators and range traders selling in profit-taking after the market rally. While the “HODLers” or long-term investors are still holding on to their currencies and not contributing to the selling pressure.
And they said: “The total profits and losses achieved for the entire market were positive in January 2023 for the first time since April 2022. The continuation of this trend means the end of the bearish wave in the market.”
In addition, Bitcoin’s “dominance” or its share of the total cryptocurrency market capitalization is hovering around 41% this month. These are levels not seen since last July. Analysts see this as mimicking a similar jump in bitcoin’s market cap in April 2019, when bitcoin’s price rally formed the bottom of the cryptocurrency market.
Stock market movements are also a relatively high-risk financial asset. Bitcoin prices are likely to be supported in the coming week, especially the performance of technology stocks, which are also sensitive to interest rate levels.
The correlation coefficient of bitcoin price with 0.94, which is the highest level since May 2022, according to Reuters, and this means that they are moving in almost the same direction (identical and harmonious movement when the ratio is equal to 1).
In late November, the price of bitcoin broke its correlation with stock price movements. The correlation coefficient was negative at 0.7.
See the original article