Will This Year Mark a Revival for Bitcoin?

Learn about what brought bitcoin up to 20K in January, but also about the latest news with altcoins like Solana, and what the year might bring

Can Bitcoin Go from Rags to Riches?

In the first three weeks of January, financial traders engaged in what Bloomberg called “a two-fisted embrace of some of the riskiest and most speculative trades around”. The ARK Innovation ETF, which focuses on technological innovation, gained 20%, coming out of a challenging year in which they saw enormous 67% losses.

According to Jeremy Grantham of GMO, it was this trend that swept bitcoin up to 20K on the 14th of January, which hadn’t happened in two months. Grantham said another factor could have been the end-of-year bonuses many people had received, which inspired some speculative trading. Analysts also pointed to the feeling the Fed was destined to be dovish this year. The result was to elevate major and minor coins, including names like Ether, Axie Infinity, and Decentraland.

Three weeks into the new year, bitcoin had surged as much as 50% since the end of November. As we turned our calendar pages over to February, however, cryptos stepped on their brakes, losing 4% in a week. The responsible party here seemed to be the strong data released on the US job market, which discouraged dovish expectations of the Fed.

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BNY Mellon

Bank of New York Mellon Corp (BNY) and other Wall Street heavyweights have not lost their interest in blockchain technology, despite the recent carnage in the sector following the collapse of the FTX exchange. BNY started off their crypto custody platform (which takes care of clients’ crypto assets) a month before FTX went bankrupt, but they’re also enthused about the power of blockchains to reduce the error in record-keeping.

Among their crypto projects is tokenization, which takes traditional assets like bonds and manages them on the blockchain. “This will continue to be a focus for us”, said CEO Robin Vince in January, “not so much crypto, but really the broader opportunity that exists across digital assets and distributed ledger technology”.

BlackRock is another Wall Street name with an interest in tokenization, and Fidelity Investments recently hired 100 people to help realize their own crypto goals.

Cathie Wood

As of the start of February, Cathie Wood’s ARK Investment had not repented of their prediction that bitcoin would rise to the level of $1 million before 2030. “Despite a turbulent year, Bitcoin has not skipped a beat”, explained ARK’s Yassine Elmandjra. “It’s network fundamentals have strengthened and its holder base has become more long-term focused”. For January as a whole, ARK rallied 29%, and Bitcoin was up 40%.

Solana

2022, for Solana, was a year they would like to soon forget. The coin lost 96% in the harsh crypto winter that held sway. SOL was viewed as particularly suspect due to the fact that FTX’s fallen leader Sam Bankman-Fried actively promoted it. FTX seem to have owned as much as 58 million SOL tokens at the time of their downfall.  

On January 2nd this year, Solana surprised us by surging 14% in a single day. The coin had gotten a push when Ethereum’s Vitalik Buterin tweeted at the end of December that “the chain has a bright future”. As far as non-fungibles are concerned, the top trading volume actually belonged to Solana in January.

A Word of Warning

“Mark my words”, said Shaktikanta Das, the governor of India’s central bank, in December, “the next financial crisis will come from private cryptocurrencies”. Das’s view is that cryptos should be banned, as was China’s when they outlawed cryptocurrencies and closed the doors on crypto miners in 2021.

Das is in good company in some ways, because the deputy governor for financial stability of the Bank of England agrees that a risk of financial crisis emanates from cryptos. Back in October, the Commodity Futures Trading Commission in the US were worried that, if institutional adoption of crypto rises, this could cause “financial stability risk [to] increase and could rise to the level of systemic risk”.

The Landscape Ahead

After January brought bitcoin up to 20K and beyond, and the coin then hesitated going into February, technical analysts noted that its 50-day moving average almost exceeded its 200-day average, which struck their attention because this would have formed a technical indicator called a golden cross.

“Most instances of a golden cross have resulted in favorable returns for bitcoin, and many have occurred at critical long-term inflection points”, explains Sean Farrell of Fundstrat Global Advisors. However, analysts were also aware that a significant difference between the years 2020 and 2021, when Farrell’s rule applied, on the one hand, and our case on the other, is the fact that we’re emerging from several months of Fed rate hikes.

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