Crypto Takes a Break to Start February – What’s Next?

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Bullish cryptocurrency investors must be in awe of the January they just had. That said, the overall crypto market is taking a break to start February, leaving questions to be asked. Namely: what is the most upside or next weakness as investors await the direction of interest rates?

The traditional stock market is already nervous about what the US Federal Reserve will or will not say in its next decision on the direction of interest rates. Crypto markets are also under Fed watch, especially given how they tracked traditional markets last year as high inflation put downward pressure on stocks and bonds.

Of course, the crypto followed, jeopardizing its status as an uncorrelated asset. As the crypto market began to rally late last year, it was hit by the collapse of cryptocurrency exchange FTX, which dealt a final blow to end the year.

Of course, what goes up must eventually come down and vice versa. After a tumultuous 2022, bitcoin started the new year with a bang, but the proverbial tune might be coming out of the tires.

“After January’s impressive rally, Bitcoin appears to be taking a breather in February,” a Coin Telegraph post said. “This is a positive sign as vertical rallies are rarely sustainable. A minor drop could rattle nervous buyers and provide long-term investors with an opportunity to add to their positions.

The question now remains whether bitcoin and the broader crypto market can sustain the rally after the recent pullback. As noted, it could also hinge on whether the Fed continues to tighten monetary policy, especially after the hot jobs data saw companies increase their payrolls.

“Opinion remains divided, however, on whether or not Bitcoin has bottomed out,” the article adds. “Some analysts expect the rally to reverse and fall below the November low while others believe markets will continue higher and frustrate traders waiting to buy at lower levels.”

Play both sides of the coin with ETFs

Exchange-traded funds (ETFs) can allow investors to participate in bitcoin’s price action without directly investing in the digital currency itself. Consider the ProShares Bitcoin Strategy ETF (BITO) and the ProShares Short Bitcoin Strategy ETF (BITI).

For bulls, BITO creates capital appreciation through its use of bitcoin futures, allowing investors to gain exposure to bitcoin price appreciation within the regulatory framework of a traditional financial exchange. For bears, BITI seeks daily investment results equal to the inverse (-1x) of the daily performance of the S&P CME Bitcoin Futures Index, allowing traders to take advantage of bitcoin price declines.

For more news, insights and analysis, visit the Crypto Channel.

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