Bitcoin, ether on track for a positive February even though the 2023 risk-on rally is fading

Bitcoin and ether are on track to post a modest win in February, even after a massive drop earlier in the month.

Bitcoin is set to post a gain of about 1% on the month, according to Coin Metrics. In January, bitcoin surged 38% and best month since 2021. Meanwhile, ether rose about 3% in February, following a 31% increase in January.

Investors panicked earlier this month after what appeared to be the start of a potential regulatory crackdown on crypto businesses in the United States — including the Securities and Exchange Commission. . enforcement action against KrakenTheir Wells announcement of a future settlement for Paxos and the New York State Department of Financial Services ordering Paxos to stop minting the Binance USD (BUSD) stablecoin.

That led to a short-lived sell-off of the crypto asset that saw bitcoin and ether drop around 6% and 8.5% respectively in the three-day period ending Feb. 10. Although they did quickly recovered those losses the following week, but they’ve had a bit of a lull since then.

“It’s easy to say the lows are behind us because there hasn’t really been any other selling, but in terms of what’s really taking them,” said Jeff Dorman, chief investment officer at Arca. we go higher – it is more difficult.”

“Most of the negative news right now comes from regulators, but it doesn’t really have any lasting effect on the market because everything in crypto has substitutes. perfect,” he added, meaning that when some crypto companies in the past have been hacked by regulators, traders can always move their operations elsewhere.

While regulatory scrutiny is going strong in the United States, reports that Hong Kong is planning to legalize retail cryptocurrency trading as part of a larger effort to become a central A global crypto hub emerged this month, with quiet support from China. This move is a positive catalyst for the cryptocurrency.

In the US, however, investors are watching the Fed, said James Lavish, managing partner at the Bitcoin Opportunity Fund.

“Bitcoin has been the spearhead of risk assets for a long time,” he said. “That is often what moves first when you talk about buying or selling risky assets as part of your portfolio allocation, and when we do have a Fed pivot, I hope. that bitcoin will detect that first. It will have a strong move.”

Dorman argues that macro events do not affect bitcoin or the broader crypto market as they did in early 2022, before the Terra project collapsed in the spring.

He noted that January was a “great” month for most asset classes, including cryptocurrencies, following the very negative sentiment that investors brought in at the end of the year. The S&P 500 And Nasdaq Composite their post The best January 4 years and 22 years respectively. Both are on the decline in February.

While this month has been “a complete reversal,” Dorman said, the cryptocurrency hasn’t gotten caught up in it.

“There is certainly a macro significance to that in the sense that the market is starting to price in top terminal interest rates and the numbers are down in inflation, which reversed in February,” he said. “. “In February, digital assets didn’t sell off as much as you would have seen from the stock market in the exchange rate market.”