Bitcoin at 21,000 euros – but the crypto cool is not over

Bitcoin at 21,000 euros – but the crypto cool is not over

New year, new luck in the crypto casino. In the middle of January 2023, the prices of Bitcoin, Ethereum and Co. decided to rise again. After several crashes – the increase in US rates, Terra/LUNA and FTX – crypto assets have collapsed by two-thirds and more. Some signals such as LUNA or FTT have disappeared and become poor, but many others are now gradually working again.

First of all, Bitcoin itself. The market leader, probably the only truly decentralized currency, has seen an increase of 38 percent since the beginning of the year – from 15,000 euros to almost 21,000 euros on Saturday morning. Ethereum, number two, has also risen by around 38% since the beginning of the year – and is now trading at over 1,500 euros again. Solana (SOL; +150%), SHIBA INU (+52%), Cardano (ADA; +47%) and Polkadot (DOT; +43%) have also had strong growth rates since the beginning of the year.

Compared to key stock indices that track the US economy and the technology sector, crypto assets are outperforming in the new year. Here is a comparison with the Dow Jones, S&P500 and Nasdaq100:

It is interesting that crypto investors are again offering coins and tokens at a higher value than at the end of 2022, when the industry was just bathing in the bankruptcy of FTX. But with the Sam Bankman-Fried trial pending, there seems to be a sense that this phase is now over. Even the bankruptcy of Genesis, the trading subsidiary of the crypto group Digital Currency Group, seems to have already been priced in – Friday’s news did not shock the markets in any way, on the contrary things clearly went up on Saturday night.

A look at the weather gauge shows: The sentiment has gone from the fear zone to neutral – a little more, and crypto investors would be clearly back in the “greed” zone, where investments usually increase significantly. The same thing can be seen in the common stock markets, where the situation has clearly returned to the “greed” range.

Latest Crypto Fear & Greed Index

But the crypto winter is not over

However, recent hype can develop into a trap. The US-dominated tech industry, to which the price of cryptocurrencies has been heavily linked in recent years, is facing a tough earnings season. The heralds of this are significant job losses at Amazon, Microsoft, Alphabet/Google and Meta/Facebook, which suggests mixed figures for the last quarter of 2022 (the so-called “Russian winter”). This could ease the situation again in the coming weeks. Unfortunately, the energy crisis and the war in Ukraine as well as the bad relationship with the Chinese business giant are still big problems for the economy.

The expected easing action by the central bank against inflation is seen as a ray of hope for the investment environment. This is likely to have peaked in the US and the EU, which is why the ECB and Fed may be more reluctant to make significant interest rate hikes in the coming months. In the US, however, interest rates of around 5 percent are expected by the middle of the year, which undoubtedly makes risky assets such as technology and crypto unattractive to many investors.

That’s why the famous pundit Tony Ghinea warned on Twitter against a short trip to the top. “The bigger the pump, the harder it is $BTC will fall to the bottom,” he wrote. The pump may come from a fast trade in Asia, but there are no signs of a sustained trend. In such situations, traders often like to talk about “beating a dead cat” – i.e. an unstable price recovery after of a major accident. The word comes from the saying: “.Even a dead cat will fly if it’s dropped from high enough!”

In this regard, it should be noted that the entire crypto industry continues to talk about the crypto cool. The recent wave of suspensions of Coinbase and shows how the industry’s biggest companies view long-term development – which is for the worse.

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