Bitcoin (BTC) hovered around $23,000 on February 1, after posting its best January performance in ten years.
The end of the Bitcoin bear market is the “default view”
Data from Cointelegraph Markets Pro and TradingView confirmed a monthly close of around $23,100 for the BTC/USD pair, its highest since July 2022.
The largest cryptocurrency ended the first month of the year up 39.6%, according to Coinglass statistics.
The impressive performance encouraged bulls, many of whom had kept the faith despite massive misgivings from more conservative market participants.
“Bitcoin closes with a monthly low”, reacted the operator, businessman and investor; Bob Loukas.
“I mean, anything can happen, right. But the absolute default view should be the bear market ended in December.”
As Cointelegraph reported, opinions differ considerably on how Bitcoin will perform in February, with one trader expecting “bearish” conditions to return after five-month highs.
The outlook for next month remains cloudy due to macroeconomic triggers. In particular, on February 1 the United States Federal Reserve will confirm its next rise in interest rates, and the European Central Bank will do the same on February 2.
Cryptocurrency research and analysis firm Arcane Research says the 25 basis point rise is almost priced in by the market, but the future is not so certain.
“Given a relatively strong market recovery, Chairman Powell may take advantage of maintaining the dovish tone, emphasizing the importance of incoming economic data,” he argued in a blog post published on January 31, adding that the consensus ” expect a 25 basis point hike on Wednesday and another 25 to 475 basis point hike on March 22.”
“Currently, the most likely outcome is a zero adjustment during the FOMC meetings on May 3 and June 14, but a further 25 basis point hike is still possible,” he said.
Expectations for a 25 basis point rise stood at 99.3% at the time of writing, according to CME Group’s FedWatch tool.
If the door were opened to surprises, volatility could rise accordingly, and rate hike decisions are already a classic catalyst.
However, Arcane has shown that with each passing hike, the volatility around the Fed’s move has been decreasing.
“This could suggest that the trend of massive FOMC-induced volatility in BTC is reversing,” he concluded.
Dollar strength points to key rebound
Another concern for cryptocurrency performance is the strength of the US dollar.
In a market update last week, trading firm QCP Capital warned its underwriters that a “massive positive divergence” was taking place in the US dollar index (DXY).
Traditionally inversely correlated with risk assets, the DXY has been in a downtrend since mid-2022, but has contained losses in the new year.
“This is the same setup we saw in the BTC/ETH pair in December – and as we witnessed there, any break to the top will therefore be extremely sharp and violent,” QCP wrote.
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