The second-best January on record for BTC price action coincides with differing opinions on U.S. economic policy.
It hovered around $23,000 on Feb. 1 after printing its best January performance in 10 years.
BTC/USD 1-Hour Candlestick Chart (Bitstamp). Source: TradingView
The end of the Bitcoin bear market is the “default scenario”.
Data from Cointelegraph Markets Pro and TradingView confirmed the monthly close for BTC/USD at around $23,100 — the highest since July 2022.
The largest cryptocurrency finished the first month of the year up 39.6%, according to data from Coinglas.
BTC/USD monthly return comparison (screenshot). Source: Coinglass
The impressive performance emboldened the bulls, many of whom held confidence despite the collective misgivings of more conservative market participants.
“Bitcoin monthly swing ends with a low,” responded trader, entrepreneur and investor Bob Loukas.
“I mean, anything can happen, right. But the absolute default scenario should be that the bear market ended in December.”
As reported by Cointelgraph, opinions on how bitcoin will behave in February vary widely, with one trader expecting “recessionary” conditions to return after five month highs
The picture for the coming month is clouded by macroeconomic triggers Notably, on February 1, the United States Federal Reserve will confirm its next interest rate hike, and the European Central Bank will do the same on February 2.
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While a 25 basis point (bps) hike by the Fed is all but “unanimously” valued, says crypto research and analysis firm Arcane Research, the future remains less certain.
“Due to an uncommonly strong market recovery, Chairman Powell will take advantage of maintaining hawkish restrictive undertones by emphasizing the importance of incoming economic data,” argued the January 31 blog post, with the consensus “25bps growth expected another 25bps rise 22 on Wednesday to 475bps in March”.
“Currently, zero adjustment is valued as the most likely outcome at the FOMC meetings on May 3 and June 14, but another hike of 25bps remains within the realm of possibility,” it noted
According to the CME Group’s FedWatch Tool, expectations for a 25bps rise totaled 99.3% at the time of writing.
Fed target rate probability chart. Source: CME Group
Should the door be opened for surprises, it could result in increased volatility, with rate hike decisions already a classic trigger.
However, Arcane pointed out that the volatility around the Fed’s move cooled with each passing pedestrian.
“This could indicate that the trend of massive FOMC-induced volatility in BTC is fading,” it concluded.
Bitcoin volatility comparison chart (screenshot). Source: Secret Research
Dollar force eyes the key rebound
Another concern for crypto performance comes in the form of US dollar strength.
Related: Best January Since 2013? 5 things to know in Bitcoin this week
In a market update last week, trading firm QCP Capital warned clients that a “massive positive divergence” was in play in the U.S. Dollar Index (DXY).
Traditionally inversely correlated with risk assets, DXY has been on a downtrend since mid-2022 but has stopped losing in the new year.
“This is the setup that we saw in BTC/ETH in December – and as we saw there, so any breakout to the upside would be extremely sharp and violent,” QCP wrote
US Dollar Index (DXY) 1-Day Candle Chart. Source: TradingView
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