It is no secret that the global economy has continued to weaken over the course of the past year. To this point, on Jan. 19, the United States governm
It is no secret that the global economy has continued to weaken over the course of the past year. To this point, on Jan. 19, the United States government hit its “debt ceiling,” i.e. the total sum of money that the U.S. Treasury can borrow to fund its ongoing federal operations, leading to renewed concerns that more financial pain and the economic slowdown could be incoming.
Similarly, on the other side of the Atlantic, the United Kingdom has been struggling as well. This is made evident by the fact the number of company insolvencies registered in 2022 hit 22,109 — a 57% spike from the year prior and its highest rate since 2009. Not only that, the International Monetary Fund recently released a report suggesting that the United Kingdom would be the only G-7 nation to face a recession this year.
However, amid all this devastation, the crypto market seems to have caught some wind in its sail over the past month. In January, the total capitalization of this sector surged from $828 billion to approximately $1.1 trillion, signaling a rise of nearly 32%. Focusing on Bitcoin (BTC) particularly, on Jan. 30, the cryptocurrency rose to $24,000 after seemingly having stagnated around the $16,500 range for the better half of November and December.
In fact, the asset’s share of the market’s total cap rose as high as 44.82% recently, its highest such level since June last year. As a quick remedy, this number usually rises so steeply only when investors start limiting their exposure to altcoins and pouring their capital back into BTC.
Is $25,000 the next stop for Bitcoin?
After successfully defending a price target of $22,500 since Jan. 20, Bitcoin is currently showcasing a 30-day profit ratio of around 40%. This spike has been mirrored by similar surges in the stock market, which rallied recently after China eased its COVID-19 restrictions after three long years of strict pandemic controls.
Furthermore, as per data made available by financial services company Matrixport, American institutional investors currently account for 85% of all recent Bitcoin accrual activities, suggesting that mainstream players are not ready to give up on the digital asset market. Thus, to gain a better understanding of where the industry may be headed in the near term, Cointelegraph reached out to Timothy T. Shan, chief operating officer for Avalanche-based decentralized exchange Dexalot. In his view:
“I think the recent rally in Bitcoin has been a positive surprise given all the negative news in the industry that is yet to be fully played out. That said, I don’t think this current rally is sustainable and users should expect more volatility.“
On a somewhat similar note, Frederic Fernandez, co-founder of DeFi trading application DEXTools, told Cointelegraph that the new year could be bullish for the crypto market if and only if the global economy is able to forge a recovery of sorts. This is because a large-scale trend reversal could boost the demand for alternative investments and increase liquidity in the market.
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“The market could remain bearish if economic uncertainty increases as restrictive regulations may be imposed. However, if Bitcoin reaches $25,000, that could mean increased confidence and acceptance of cryptocurrencies leading to increased investment and widespread adoption,” he added.
Key market indicators
According to Luuk Strijers, chief commercial officer for Bitcoin and Ether (ETH) options exchange Deribit, the crypto market is slowly returning to greener pastures. To support this claim, he told Cointelegraph that the market is once again witnessing a “contango,” a situation where the futures price of an asset is higher than its spot price. In layman’s terms, a contango is usually observed when the price of a particular asset is set to rise over time.
He said that BTC’s 25-Delta put skew has moved from over 30% to below zero, a bullish indicator. The above-stated metric allows analysts to forecast the price movements of an asset as well as estimate future fluctuations (volatility) based on certain predictive factors. “A drop in 1-Month Skew indicates the shorter-dated out-the-money calls are getting more expensive relative to the out-the-money puts, which is a bullish signal,“ Strijers noted.
He also highlighted that open interest in regard to Bitcoin and Ether options has been growing again, which is a positive sign specially when considering that a lot of this momentum was lost after last year’s large year-end expiry.
Not only that, Strijers pointed out that the options market’s put-call ratio (PCR) reached a local bottom late last month, suggesting that investors may once again be warming up to the digital asset industry. PCR is an indicator that is commonly used to determine the mood surrounding the options…
cointelegraph.com