Bitcoin up over 21% in best weekly performance since February 2021. Bull run or bull trap?

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Bitcoin, the world’s largest cryptocurrency by market capitalization, rose 21.7% from Jan. 11 to Jan. 18, trading at US$21,212 as of 2 p.m. Wednesday in Hong Kong. Ether gained 18% over the same period, changing hands at US$1,576.

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With Bitcoin above the US$21,000 mark, the global benchmark cryptocurrency has returned to its price level before the November 11 collapse of cryptocurrency exchange FTX. BTC prices have since fallen, trading at US$20,935 as of 4:30 p.m. Friday in Hong Kong.

Kasper Vandeloock, CEO of quantitative trading firm Musca Capital, attributes the recovery to slowing inflation, interest from venture capitalists and the tech sector.

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Chris Bradbury, managing director of capital management protocol DeFi Oasis, said inflation may have peaked in developed countries and is the main driver of crypto and traditional markets. The sentiment also seems to be that the expected recession this year will not be as deep as initially thought, he said in an email response to questions.

Bradbury said Bitcoin and Ether are rallying due to bullish momentum in traditional markets. Bitcoin, as well as most crypto assets, are still highly correlated and valued like tech stocks, and we’ve also seen most of them rise over the past few weeks, but crypto prices often move at a fast pace. exaggerated.

Vandeloock said the crypto market is seeing some relief after a difficult year: Many traders were aggressively short after the FTX insolvency and they are now looking to exit their position, Vandeloock wrote, adding that Ether has could find a bottom sooner than BTC, due to the merger and DeFi interest. BTC is simply catching up with what ETH has already done.

The impressive price action seen in Bitcoin is clear evidence that investors are now positively accumulating the coin, wrote Abraham Piha, Managing Director of Tomi, an anonymous Decentralized Autonomous Organization (DAO) at Forkast. With the increase in Bitcoin mining activity, as evidenced by the recent all-time high in hashrate, it is clear that miners have run out of coins to sell, which has resulted in more coins for investors to buy.

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The native Solanas token was the biggest gainer of the week among the top 10 non-stable cryptocurrencies, up 39.3% on the weekly chart, trading at US$22.

The global crypto market cap topped US$1 trillion on Jan. 15, for the first time since Nov. 8, according to data from CoinGecko. Bitcoin’s US$409 billion market capitalization currently accounts for 39.86%, while Ether accounts for 18.5% of the total market capitalization.

Metaverse Tokens Are Gaining Ground

Decentralands MANA rose 71.1% last week to trade at US$0.69. This represented the largest weekly gains in the entire crypto market, according to data from CoinGecko. Sandbox’s native token, SAND, also rose 42.3%, to change hands at US$0.74.

The metaverse is the new buzzword in the broader digital and technology ecosystem, and the associated tokens benefit from it. Many investors believe that metaverse protocols will be a major entry point into Web3 for billions of people, so the underlying appeal of tokens has grown even stronger this year, Piha wrote.

Vandeloock attributes this increase to the low liquidity of metaverse coins: people were looking to play altcoins as many were green in double digits over the past few weeks. These metaverse coins are illiquid and have low volume, making them the perfect market to play at these times.

The liquidity of metaverse tokens is incredibly low, and as always when there are large enough market moves, you will see weaker liquidity tokens have larger than average fluctuations, however, this is often not sustainable , wrote Bradbury.

If you look at Uniswap, SAND only has $1.5 million in value locked, MANA even less at $640,000, so again short term views to try and find conclusions like this are very difficult. The real test will be whether things like SAND and MANA can sustain the excess gains they have made over the next 30-60 days against BTC and ETH, Bradbury added.

As Bloombergs market strategist Mike McGlone rightly pointed out, the current massive tightening by the Federal Reserve is a major selling point that has driven the price of BTC and the market as a whole higher. With their positive fundamentals, many altcoins are also contributing to the underlying market push, Piha wrote.

What’s planned next week?

Last week, the crypto market capitalization crossed US$1 trillion several times. We can expect the industry’s valuation to form support at US$1 trillion while pushing to new highs. However, investors should be wary of near-term monetary tightening due to rising interest rates around the world, Piha wrote.

The most significant effects on the price of the markets last year came from very unexpected events, such as 3AC, FTX, etc. Recent gains that have emerged over the past two weeks are likely to pull back slightly, this is often what we see during times of uncertainty, the main question will be whether markets can at least hold on to some of the gains made, wrote Bradbury, adding that there is still a lot of uncertainty in the traditional markets and that the industry has a lot of confidence to recover from all its problems last year involving centralized parties such as 3AC, FTX and Genesis.

Despite events over the past year that have shaken confidence in centralized crypto firms and the broader crypto industry, Bitcoin’s 23% rally in the week to Jan. 15 represents its best ever. weekly performance since February 2021. According to Bloomberg analysts, this usually signals the start of a larger rally: weekly ascents of at least 20% have occurred nine times in the past five years, after which the token has added an average of 40% over three months.

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