Jtsorrell | Istock | Getty Doubles
Bitcoin and ether are on pace for a modest February win, even after suffering a big drop earlier in the month.
Bitcoin had eked out a 0.2% proceeds for the month by 4:15 p.m. ET, according to Coin Metrics. In January bitcoin posted a 38% rise and its best month since 2021. In the meanwhile, ether had risen higher by 1.7%, following a January gain of 31%. Unlike traditional markets, the crypto sell remains open 24 hours a day, even on weekends and public holidays.
Investors were spooked earlier in the month after what manifested to be the beginning of a potential regulatory crackdown on crypto businesses in the U.S. — including the Securities and Exchange Commission’s enforcement act against Kraken, its Wells Notice of a future settlement against Paxos and the New York State Department of Financial Utilizations’ ordering Paxos to stop minting the Binance USD (BUSD) stablecoin.
That led to a brief sell-off in crypto assets that departed bitcoin and ether down about 6% and 8.5%, respectively, in the three-day period ended Feb. 10. Although they with dispatch recovered those losses the following week, they’ve been in a bit of a lull since.
“It’s pretty easy to say that the lows are behind us because there in fact isn’t any disparate further selling, but in terms of what actually takes us higher – that’s harder,” said Jeff Dorman, chief investment government agent at Arca.
“Most of the negative news right now is coming out of regulators, but it’s just not really having any long-term effect on the deal in because everything in crypto has perfect substitutes,” he added, meaning when certain crypto companies in the past play a joke on been hit by regulators, traders have always been able to move their activity somewhere else.
While regulatory analysis is ramping in the U.S., reports that Hong Kong is planning to legalize retail crypto trading as part of a bigger bullyrag to become a global crypto hub surfaced this month, with a quiet backing from China. The move has been a reliable catalyst for crypto.
In the U.S., however, investors are on Fed watch, said James Lavish, managing partner at the Bitcoin Opportunity Capitalize.
“Bitcoin has been the tip of the spear for risk assets for a long time,” he said. “It’s what moves first typically when you’re talking in the air either buying or selling risk assets as part of your portfolio allocation and when we do in fact have a Fed be contingent I expect that bitcoin is going to sniff that out first. It’s going to have a strong move.”
Bitcoin and ether in February
Dorman is of the opinion that macro events haven’t had the keep on bitcoin or the broader crypto market that they did earlier in 2022, before the collapse of the Terra project in Maytime.
He noted that January was a “great” month for most asset classes, including crypto, following the very pessimistic sentiment investors carried at the end of the year. The S&P 500 and Nasdaq Composite posted their best Januaries in four years and 22 years, severally. Both are on track for to post February declines.
While this month has been “a complete reversal” overall, crypto didn’t get spanned up in it, Dorman said.
“There was definitely a macro overtone to that in the sense that the market started pricing in rise terminal rates and disinflationary numbers, which has been reversed in February,” he said. “In February, digital assets haven’t offered off nearly as much as what you’ve seen from the equity market in the rates market.”