Bitcoin, ether on track for a positive February despite mid-month drop and fading 2023 risk rally

Bitcoin and ether are on track for a modest victory in February, even after suffering a big drop earlier in the month.

Bitcoin it had posted a 0.2% gain for the month as of 4:15 p.m. ET, according to Coin Metrics. In January, bitcoin registered an increase of 38% and its best month since 2021. Meanwhile, ether it had risen 1.7%, after a January gain of 31%. Unlike traditional markets, the crypto market It remains open 24 hours a day, including weekends and holidays.

Investors spooked earlier in the month after what appeared to be the start of a potential regulatory crackdown on crypto firms in the US, including the Securities and Exchange Commission. enforcement action against Krakenyour Wells Notice of a future settlement against Paxos and the New York State Department of Financial Services directing Paxos to stop minting the Binance USD (BUSD) stablecoin.

That led to a brief sell-off in crypto assets that saw Bitcoin and Ether fall around 6% and 8.5%, respectively, in the three-day period ending Feb. 10. Although they quickly recouped those losses the following week, they have been somewhat of a lull ever since.

"It's pretty easy to say we're past the lows because there's really no more misselling, but in terms of what really gets us higher, that's more difficult," said Jeff Dorman, Arca's chief investment officer.

“Most of the negative news right now comes from regulators, but it doesn’t really have any long-term effect on the market because everything in crypto has perfect substitutes,” he added, meaning when certain crypto companies in the past have been affected by regulators, traders have always been able to move their business elsewhere.

While regulatory scrutiny is increasing in the US, reports surfaced this month that Hong Kong plans to legalize retail cryptocurrency trading as part of a larger push to become a global cryptocurrency hub, with quiet backing from China. . The move has been a positive catalyst for cryptocurrencies.

However, in the US, investors are under the watchful eye of the Fed, said James Lavish, managing partner of the Bitcoin Opportunity Fund.

"Bitcoin has been the spearhead of risk assets for a long time," he said. “Usually it's the first mover when you talk about buying or selling risky assets as part of your portfolio allocation and when we do in fact have a Fed pivot, I expect Bitcoin to catch that first. It's going to have a strong move."

Dorman is of the opinion that macro events have not had a grip on bitcoin or the broader crypto market than they did in early 2022, prior to the collapse of the Terra project in the spring.

He noted that January was a “big” month for most asset classes, including crypto, following the very negative sentiment investors had at the end of the year. He S&P 500 and Nasdaq Composite they published their best januaries in four years and 22 years, respectively. Both are on track to record falls in February.

While this month has been “a complete turnaround” overall, cryptocurrencies have not been dragged down by it, Dorman said.

"There was definitely a macro nuance to that in the sense that the market started pricing in maximum terminal rates and disinflationary numbers, which reversed in February," he said. "In February, digital assets have not sold as much as what you have seen in the stock market in the rate market."