The largest token is up over 40 percent since the turn of
the year, a first-month gain bettered only twice before when crypto was in its
infancy. Smaller coins like Solana, Axie Infinity and Decentraland have doubled
in value, part of a $280 billion January
climb in digital assets overall, CoinGecko figures show.
The rebound from last year's deep rout is part of a wider
revival in risk appetite on expectations that central banks will slow
interest-rate hikes and perhaps even cut borrowing costs later this year as
high inflation moderates.
The rally in virtual coins has weathered ongoing fallout
from the collapse of Sam Bankman-Fried's FTX exchange — such as the bankruptcy
of crypto lender Genesis Global Holdco LLC and a spate of layoffs across the
industry.
January “feels like a month of new beginnings, with emerging
clarity as to bankruptcy proceedings, corporate restructurings and market
fundamentals pointing to the bottom being behind us,” wrote Noelle Acheson,
author of the “Crypto Is Macro Now” newsletter.
Still, there are plenty of skeptics who doubt if the rebound
in the likes of crypto and tech stocks will last. One risk is that the soft
economic landing markets are hoping for is fanciful because rates must stay
higher for longer.
The comeback of speculative assets like Bitcoin and the Ark
Innovation ETF “will likely reverse” if oil, wages and consumer-price increases
shift the “soft landing” narrative temporarily in coming weeks into a “no
landing” view, Bank of America Corp. strategists led by Michael Hartnett said
last week.
Federal Reserve Chair Jerome Powell may also remind
investors that officials plan to keep rates elevated for some time. He's due to
speak after an expected downshift by the Fed to a quarter-percentage-point hike
this week.
Some corners of global markets are also flashing warnings.
For instance, hedge funds have built up the biggest bearish bet on bond futures
on record, clashing with the narrative that a peak in rate hikes is near.
For now, momentum is king. Rick Bensignor of Bensignor
Investment Strategies targeted $25,000 for Bitcoin in a note Monday, a level it
last hit in August.
Bitcoin edged down about 1 percent to $23,640 as of 11:30am
in Tokyo on Monday. It's on course for the best month since December 2020.
Ether, the second-largest token, was steady at about $1,635 © Bloomberg LP
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