- Many traders differ on their expectations regarding BTC’s performance in February after recording its best January performance in a decade.
- Trading firm QCP remarked that the DXY would also play a key role in BTC’s performance this month.
After recording its best performance in January in a decade, BTC trades around the $23,000 range today, February 1. Tradingview data shows that BTC’s January close of $23,000 is its best since last July. Coinglass statistics show that the leading digital asset gained nearly 40 percent in the first month of the new year.
BTC’s outstanding performance is an excellent boost for bulls who weren’t fazed by the criticisms from conservative market players. Meanwhile, some BTC investors are starting to react to the digital asset’s January performance. Bob Loukas, an entrepreneur, trader, and investor, remarked that BTC’s performance indicates that the bear market ended last month.
Nevertheless, traders differ on what to expect from the leading digital asset in February. One of them predicts bearish conditions saying that’s the next move after five months of gains. However, macroeconomic factors would significantly influence BTC’s price performance for this month.
The first two days of the new month are crucial, with the US Fed announcing its next rate hike interests on February 1, while Europe’s apex bank (the European Central Bank) will do the same on the next day. Even though many industry experts unanimously predict a 25 basis point (BPS) raise, arcane research (a crypto research and analytics firm) argues that nothing is confirmed until the Fed makes the announcement.
The US Fed would likely maintain the same rate increase for the next 2 months – Arcane Research
Arcane explains in a January 31 blog post that the US Fed chief, Jerry Powell, would likely maintain a hawkish interest rate raise based on incoming data and a fairly strong market recovery. The post added that economists predict a 25 BPS increase for February and March. The Fed will announce its next rate increase by March 22.
The research further noted that the Fed might maintain the 25 BPS rate increase till June. At the time of writing, the CME Group Fedwatch Tool revealed that 99.3 percent of analysts expect a 25 BPS rate hike by the Fed. However, if there is any surprise in the Fed’s announcement, notably an aggressive rate hike, it will lead to volatility in the BTC market.
Nonetheless, Arcane remarks that rate hikes in the last few months show that the Fed may no longer raise rates aggressively. The research concluded that these past trends indicate a significant reduction in FOMC-induced BTC volatility. Meanwhile, the on-chain analytics firm, Santiment also shares similar views as arcane in the latest issue of its monthly market recap.
🥳 After the most memorable month in #crypto since $BTC and $ETH hit #AllTimeHighs in November, 2021, what can we make of the markets now? Our monthly recap looks at #Bitcoin whales, #altcoin hype, and whether you should join the other profit takers. https://t.co/5x7UWa4n99 pic.twitter.com/KtkXp1xYPk
— Santiment (@santimentfeed) February 1, 2023
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The US Dollar strength and BTC’s performance
The US Dollar strength is another key determinant of the price performance of BTC. In its latest market update, QCP capital cautioned its subscribers about the formation of a huge positive divergence on the US Dollar index (DXY). Often in an inverse correlation with risky assets, the DXY has been recording losses since last June.
However, it has been recording slight gains since the beginning of the new year. QCP noted that the BTC/ETH setup has been trending rangebound since last month. Therefore, QCP predicts its next breakout to the top will be highly violent and sharp.