Bitcoin and Altcoin Report - January Week 2

Bitcoin experienced a significant bull run on Monday due to the U.S. job report that came in better-than-expected for December, alleviating investor concerns about rate hikes. While the dollar lost strength, stocks rose sharply in Europe, Asia, and the United States. The cryptocurrency market similarly mirrored the optimistic outlook of the stock market globally, with Bitcoin appearing as one of the top moving tokens.

Altcoin accumulators are over the moon as Bitcoin and altcoins welcome a weekend pump. Major L1s like Ethereum, BNB Smart Chain, Cardano, Cosmos, Solana, and Polkadot register double-digit gains. 

But is the pump healthy? Does it change any of the existing bearishness?

Let’s take a look at the traditional market situations. Inflation is still high, although the growth of inflation is going down. That doesn’t mean the economy is on track to healthy inflation. 

U.S. Regulations in 2023

The aftermath of FTX’s collapse will predominate in American talks on crypto-regulatory issues. And finally, Sam Bankman-Fried was indicted on eight counts, including money laundering, conspiracy to commit wire fraud, and securities fraud, and is currently on American soil.

Members of the U.S. Congress are still advocating for safety measures in the wake of FTX’s demise, such as the proposed Digital Commodities Consumer Protection Act. 

Additionally, the regulatory discussion will likely center on stablecoins. With a record $7T settled in 2022, stablecoins have proven their product-market fit and are widely employed in DeFi applications, for international trade, and as a practical medium of exchange. 

However, stablecoin governance continues to be a crucial topic for legislative discussion, particularly in light of novel vulnerabilities like the use of admin keys. 

The Senate Banking Committee and the House Financial Services Committee, which hold different opinions on cryptocurrencies, govern the SEC. We may observe moderation in the SEC’s stance toward cryptocurrencies as new representatives take over the House Financial Service Committee.

The CFTC, under the oversight of the Senate Agriculture Committee and House Agriculture Committee, is anticipated to take a more favorable position toward digital assets. 

As the SEC and CFTC determine whose jurisdiction will rule over exchanges, stablecoins, and cryptocurrency security status, we can anticipate further moves on the U.S. regulatory front.

What Is the Fed’s Strategy?

Recent CPI data suggests that the Fed does not want to hurt the market to fix the rampant inflation. So the million-dollar question is: What could be the response of the Fed in the coming quarters?

Signs of recession in the housing and manufacturing sector are clearly the themes of 2023. That means house rents might fall rapidly over the next few quarters, and land/building costs will follow the trajectory. It also provides an opportunity for real estate investment, but we are crypto travelers. 

But would it be overwhelming to suggest that investing in real estate is possible with crypto? Let’s look at the project $RIO.

Realio Network is a crypto-based real-world assets investment project. It has a market cap of $1.1 million and a fully diluted valuation of $1.6 million. The project is currently in the testnet phase on the Ethereum, Algorand, and Stellar networks. 

Back to the Feds, the interest rate hike is set to be a regular phenomenon. The inflation target of 2% can be fatal to the market if executed at a go. But a slower path seems to be in the best of everyone’s interests. Stocks shall continue to bleed, and Bitcoin shall retest the lows. 

However, the Fed plans to increase the interest rates to 5% over the year. That means constant sell pressure from seasonal investors. 

Status of Fed Net Assets

Fed Net Assets are the total assets in the Fed balance sheet. Historically, during a bull run, Feds increase asset holdings because they outperform cash. Similarly, in a bear market, Feds decrease asset holdings because cash can retain value more than credit-based assets. 

Crypto Hedge Fund Ouroboros Capital reflects that in each low in net assets, the stock market finds a new low. 

Since April 2022, this is the worst drawdown liquidity. The last three times this data point printed a new low, we immediately witnessed SPX print a new low (red circles). Equities should quickly catch up to the spread.

It could be yet another bloodbath for Bitcoin and altcoins, as FUD around Huobi going illiquid remain strong. You can read the complete Bitcoin and Altcoin Report here for FREE!

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