- According to Messari, the price of Bitcoin is up 40% since the beginning of the year.
- The rally precedes expected smaller rate hikes from the Federal Reserve next week.
- Other cryptos are also rallying as the industry regains its $1 trillion market cap.
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Bitcoin is on track for its best January since 2013 as the prospect of slower rate hikes by the US Federal Reserve has heightened investor risk appetite.
On Friday, the token fell 0.3% to $23,000. But it’s up 40% so far this month, according to Messari, and is eyeing the 51% gain seen in January 2013.
Other cryptos continue to rally as the industry regains its $1 trillion market cap. Ethereum is up 32% over the past month.
“Bitcoin is up +40% year-to-date, with +35% of those returns coming during US trading hours. That’s a contribution of 85% to the rally associated with US-based investors,” Markus Thielen, head of research and strategy at digital asset services provider Matrixport, wrote in a note to clients on Friday.
The rally appears to be driven by belief that the US Federal Reserve will ease further aggressive rate hikes following signs of cooling inflation.
Core PCE data, showing a more complete picture of consumer costs and spending, suggested prices have been rising at a slower pace over the past month, the Commerce Department reported on Friday, giving the Fed scope to ease monetary tightening.
“More measured rate hikes, which are biased toward stability globally, will ease headwinds as BTC heads to new highs. But overall, investors are better prepared than ever — mentally and portfolio-wise — to deal with volatility,” Nathan Thompson, senior tech writer at crypto exchange Bybit, told insiders in a statement.
“The broader implication is that these moves reflect BTC’s increasingly significant role in economic cycles, in some cases as a hedge in capital markets.”
All eyes are on next week’s Federal Open Market Committee (FOMC) meeting, where the central bank is expected to announce a smaller hike in the fed funds rate.
“Once again, like risk-on stocks like tech stocks, it appears that bitcoin’s price is reacting to positive macro data, including the high probability of a lesser 25bp hike in interest rates, which CME futures traders appear to be pricing at a 98- percent security,” Bradley Duke, co-CEO of digital asset ETP provider ETC Group, told Insider in a statement.
Crypto markets appeared to have overcome a string of bad news for the industry, including the bankruptcies of major companies like crypto exchange FTX, lender Genesis, and hedge fund Three Arrows Capital last year.
Matrixport’s Thielen said the rally’s support was a “clear signal” that US institutions are buying up Bitcoin.
“Not only are institutions buying Bitcoin Spot, but we’re also seeing consistently high premiums for perpetual futures,” said Thielen. “We interpret this as an indication that faster institutional traders and hedge funds are actively buying the recent decline in crypto markets.”