Bitcoin’s Impressive Start to the New Year: A Closer Look at the Market Movements and Uncertainties Ahead.

Bitcoin has had an impressive start to the new year, climbing more than 26% and surprising those who expected riskier investments to face more challenges following sharp selloffs in 2022. This is the best opening month performance for the token since a 31% rally in 2020, before the pandemic hit. This surge has helped to lift the overall value of digital assets past $1 trillion, a level that was reached in November before the FTX exchange imploded, according to CoinGecko data.

On Monday, the largest cryptocurrency rose as much as 2.5% and was trading at $20,860 as of 12:18 p.m. in London, though it did experience a slight decline along with tokens like Ether, Avalanche, and Algorand. This climb is partly a bet on an end to punishing interest-rate hikes, a prospect that has also boosted stocks, bonds, and gold. However, investors are wondering if all these assets have moved too far, too fast, given that central banks such as the Federal Reserve are pledging to keep policy rates elevated until still-high inflation is vanquished.

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While there is a lot of uncertainty surrounding digital assets, including whether a short squeeze is driving up prices and will eventually peter out, Noelle Acheson, in her “Crypto Is Macro Now” newsletter, suggests that “FOMO is likely to play a role in how the market evolves from here,” using the acronym for “fear of missing out.”

According to researcher Kaiko, a jump in the average size of trades suggests that “whales” are driving the rally, referring to large crypto holders. Trade sizes have increased to $1,100 from $700 for the Bitcoin-US dollar pair on the Binance exchange since January 8th. However, market depth, a measure of how one big trade could impact the price of Bitcoin, remains near the lowest level since FTX went bankrupt, according to Kaiko.

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The crypto industry continues to brace for further fallout from the bankruptcy of FTX and ensuing fraud charges against co-founder Sam Bankman-Fried. Crypto brokerage Genesis and its parent firm Digital Currency Group are seeking to resolve debt woes, a process that could spark market upheavals.

Some technical indicators suggest that Bitcoin’s jump is becoming stretched. The token’s 14-day relative-strength index, a measure of momentum, has scaled 90, which is far above the 70 level viewed as “overbought” and the highest in about two years.

This year’s Bitcoin surge is among the signs that “there’s still a lot of froth in the marketplace” and that “investors continue to ‘act’ in a much less bearish way than they ‘speak,’” according to Matt Maley, chief market strategist at Miller Tabak + Co. Both Bitcoin and a gauge of the top 100 digital assets sank more than 60% in 2022, a painful year that raised questions about what kind of future they have.

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