Data from Cointelegraph Markets Pro and TradingView confirmed a monthly close of around $23,100 for BTC/USD — the highest level since July 2022.
The largest cryptocurrency ended the first month of the year up 39.6%, according to Coinglass statistics.
Comparing monthly returns between Bitcoin and the US dollar (screenshot). Source: Coinglass
The impressive performance emboldened the bulls, many of whom maintained confidence despite collective misgivings from more conservative market participants.
Trader, Entrepreneur, and Investor Bob Lucas Reacts: “Bitcoin is closing at a monthly swing low.”
“I mean, anything can happen, right. But the absolute default would have to be the bear market ending in December.”
As Cointelegraph reported, opinions differ widely on how Bitcoin will behave in February, with one trader anticipating a return of “bearish” conditions after five-month highs.
Macroeconomic stimulus continues to cloud the next month’s picture. Notably, February 1st will see the US Federal Reserve confirm its next rate hike, with the European Central Bank doing the same on February 2nd.
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While the future remains less certain, cryptocurrency research and analysis firm Arcane Research says the previous 25 basis points (bps) is priced in all but “unanimously.”
He argued in a January 31 blog post, adding that the consensus “expects a 25 basis point hike on Wednesday and another 25 basis points to 475 basis points on March 22.”
“Currently, no adjustments at the May 3rd and June 14th FOMC meetings are priced in as the most likely outcome, but an additional 25 basis point hike is still within the realm of possibility,” he noted.
Total forecasts for a 25 basis point hike were 99.3% at the time of writing, according to CME Group’s FedWatch tool.
Federal goal rate odds chart. Source: CME Group
If the door is open to surprises, volatility could increase as a result, with price hike decisions already a classic catalyst.
However, Arcane has shown that with each passing increase, the volatility around the Fed’s movement subsides.
“This may indicate that the trend of massive FOMC-induced volatility in Bitcoin is easing,” it concluded.
Bitcoin volatility comparison chart (screenshot). Source: Arcane Research
Eyes major dollar strength rebound
Another concern about the performance of cryptocurrencies comes in the form of the strength of the US dollar.
Related: Best January since 2013? 5 things to know in bitcoin this week
In a market update last week, trading firm QCP Capital warned subscribers that a “massive positive divergence” was playing out in the US Dollar Index (DXY).
DXY, traditionally inversely correlated with risk assets, has been in a downtrend since mid-2022, but halted losses in the new year.
“This is the same setup we saw on BTC/ETH in December — and as we saw there, any upside breakout would be very sharp and aggressive,” QCP wrote.