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Total assets under management (AUM) in digital asset investment products surged 36.8% in January to $19.7 billion, the highest level since May 2022, according to CryptoCompare. According to the crypto-intelligence firm, “Bullish sentiment was sparked by the liquidation of short positions and a favorable macro environment reflected in the latest CPI announcement that saw Bitcoin price reach $23,000 in 2022. It’s the highest level since August.”
However, CryptoCompare noted that AUM is still 38.7% below its January 2022 level. Among analysts, the main trigger for the 2022 bear market in risk assets and cryptocurrencies is the US Federal Reserve (Fed) and other major central banks’ stronger-than-expected bull markets. It is widely agreed that the policy stance has been surprisingly aggressive and hawkish in order to curb the Increased global price pressure.
Grayscale situation is delicate despite market resurgence
Despite a resurgence of crypto market sentiment in January and a rebound in AUM for crypto investment products, CryptoCompare noted that the situation with Grayscale’s Bitcoin Trust (GBTC) remains delicate. GBTC remains the dominant bitcoin mutual fund product in terms of his AUM, with a market share of 69.3%, but CryptoCompare said in January that “Grayscale’s discounts associated with his GBTC trust are marginal. It’s just scaled down,” he said.
GBTC Discount refers to the percentage of GBTC shares trading below book value. As of 31stst The GBTC discount rate for January was a staggering 42.29%, just above the lowest recorded in the 48% area recorded last December. CryptoCompare explained that “the situation remains delicate” and that Grayscale “announced the bankruptcy of sister company Genesis due to its exposure to FTX in January and made progress with the SEC to convert Bitcoin Trust into an ETF. It explains that it faces challenges including “internal lawsuits.”
Will the Federal Reserve turn investors away from crypto again?
The latest CryptoCompare report is in line with the latest weekly fund flow report from CoinShares. According to CoinShares, digital asset investment products saw their biggest inflows since July 2022 last week, with Bitcoin dominating and accounting for $116 million in inflows. January saw a clear resurgence of appetite among institutional investors for cryptocurrency investments.
But its resurrection seems set to be tested solidly this Wednesday. Fed to release latest monetary policy decision At 1900GMT, we expect a 25 bps hike in interest rates to our target range of 4.50-4.75%. After raising rates by 50 basis points at the Fed’s last meeting and by 75 basis points at each of his four previous meetings, this means the pace of rate hikes will slow again.
Optimism that the Fed is not aggressive is likely to bolster January’s rally as positive economic data point to a possible US recession later this year, with inflation showing notable signs of moderating and positive economic data pointing It was an important pillar. But macro strategists warn that market optimism may have gone too far. The market expects one more 25 bps rate hike from him after today’s move and rate cuts later this year, but Fed Chairman Jerome Powell said he could hint at more rate hikes this year. May oppose the idea of a rate cut in the second half.
Given growing signs that the 2022 bear market is over, traders should prepare for the risk of an aggressive near-term decline in cryptocurrency prices.