- КThe crypto market is recovering
- The FTX crisis becomes a thing of the past
- There is still a long way to go before stability is achieved
Bloomberg Intelligence reports that in January, over 210 million US dollars were invested into cryptocurrency ETPs. This indicator has reached its highest level since May. CryptoCompare adds that the total AUM of crypto funds increased 37% in January and reached 19.7 billion US dollars, which is also a record level since May 2022.
This indicates that despite all market difficulties, crypto is still a valuable element of the financial market.
The crypto market is recovering
“It’s pretty impressive actually. Given how bad the year was last year, to still have inflows, it’s a pretty positive sign for the category,” commented Athanasios Psarofagis, an ETF analyst for Bloomberg Intelligence.
Approximately 40 million US dollars flowed into the ProShares Bitcoin Strategy ETF. The 3iQ CoinShares Bitcoin ETF (BTCQ), which is listed in Canada, attracted almost as much. At the same time, crypto ETFs were listed among the top 10 best-performing US equity ETFs since the beginning of 2023. Valkyrie Bitcoin Miners ETF (WGMI) increased by approximately 100%, and the VanEck Digital Assets Mining ETF (DAM) grew by 76%.
Inflows into Bitcoin ETFs “have far surpassed movements in funds based on other assets,” commented Noelle Acheson, creator of the “Crypto Is Macro Now” research project.
The FTX crisis recedes into the past
The growth of crypto this January has been supported by optimism that the FTX crisis is gradually receding into the past. Another factor was the increase in other assets, including stocks. Bitcoin, the first cryptocurrency with the highest market value, increased by approximately 40% in January, which is its best result since October 2021.
“Expectations of a less hawkish Federal Reserve, China reopening and receding recession risks in Europe have meant that risk appetite has picked up considerably since Bitcoin hit those November lows. The improved market mood has been reflected in the dramatic Bitcoin rally at the start of 2023,” said Fiona Cincotta, a financial market analyst for City Index.
There is still a long way to go before stability is achieved
Many experts doubt that crypto will remain stable, at least with its current growth pace.
First, markets have been brought together by the idea that the Federal Reserve System could soon put on hold the interest rate increase, which could support riskier assets, even though the Fed has commented that it won’t happen.
Second, most cryptocurrencies are still at significantly lower levels compared to their record highs reached during the pandemic, when BTC reached almost 69,000 US dollars in November 2021. With its current value of 23,000 US dollars, only the most optimistic experts believe that it could reach the same record high levels soon.
“Like all risk assets, the crypto market could be susceptible to further pullbacks should the economic data out over the next few days confuse the consensus take on the Fed easing this year,” added Noelle Acheson.
