Crypto Is Back On A $475 Billion Frenzy

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Crypto assets are rising again after last year’s crash. Photo / 123RF

With bankruptcies, job cuts and arrests in the first weeks of the year, the crypto industry looked set to pick up where it left off after a disastrous 2022. But all is not bleak for the tumultuous world of digital assets.

In just one month and changing, around US$300 billion ($475.2 billion) was added to the market value of crypto assets, sending it back above US$1 trillion. Bitcoin jumped more than 40% to around US$23,000, rebounding from the drop to US$16,000 per token that marred the flagship cryptocurrency following the collapse of FTX last year.

Bitcoin’s chief rival token Ether is also firmly in the green, while Solana, the embattled Ethereum killer who nearly died last year, has seen a 140% increase in value so far. in 2023.

Figures from CryptoCompare also show that total assets under management for digital asset investment products rose nearly 37% in January to more than $26 billion, the highest since May 2022, the month where the unprecedented crypto crisis of confidence began.

Grayscales GBTC, an investment trust designed to track the price of bitcoin, saw average daily volume of $38.9 million last month, a 23% increase from December, according to the crypto data provider. .

The recent surge in digital assets did not occur in a vacuum, but amid a broader rally for other speculative assets.

So-called GameStop and AMC Entertainment Holdings meme stocks are up around 20 and 30% so far this year, and bitcoin investor and evangelist Cathie Woods ARKK, the exchange-traded fund has posted gains of more than 25%, supported by HODLing Coinbase shares, which in turn have more than doubled in 2023.

Jim Bianco, president and co-founder of macro research firm Bianco Research, texted me to say we’re back in 2021, referring to this year of red bull run fueled largely by excitement. of retail and the fear of missing the crypto boat.

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Log back into your Reddit account and YOLO to meme stocks, he said.

But as Crypto Twitter prepares for a long-awaited change in fortune, it’s important to take the industry’s rally with a grain of salt. January paints a nice picture for cryptocurrencies, but the shadow cast by the FTX crash still hangs.

Bitcoin has yet to venture above the US$20,000 average, a price range it stubbornly held before the FTX crash, prompting me to say that the flagship token has need a story to sell.

Most of the biggest gainers so far this year are actually still the biggest losers of the past 90 days, Jeff Dorman, chief investment officer of investment firm Arca, told me this week.

Why is the last 90 days important? Because FTX imploded the first week of November, killing what seemed like a promising recovery in digital assets at the time.

As JPMorgans Nikolaos Panigirtzoglou also pointed out to me via email, crypto venture capital funding has remained weak well into the new year, and an institutional impulse that was once present in bitcoin futures has faded at the end of January.

We suspect the crypto rally in the second half of January was driven more by retail investors than institutional investors, Panigirtzoglou told me.

And, as those of you who attended the industry’s inaugural crypto winter in 2017-2018 will know, bull runs fueled by retail investors alone can turn on a dime.

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Written by: Scott Chipolina

FinancialTimes

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