By Our Reporter
It was all cheers on Tuesday as the crypto market crossed the crucial $1 trillion mark, with Bitcoin (BTC) trading above $23,000 level on Tuesday, sustaining the rally in the virtual currency market since the beginning of 2023.
Thisnis coming for the first time since FTX’s collapse, with bitcoin set for its best month since October 202, signaling a strong rebound in investor confidence even as the industry faces headwinds.
Bitcoin, the world’s largest cryptocurrency, hit a five-month high above $23,000 over the weekend and is up almost 40% in January, on course for the best month since October 2021. The total market capitalization of virtual currencies has climbed by almost $250 billion so far in January.
It reflects a U-turn in sentiment after a dismal 2022 — a year dubbed a “crypto winter” — that saw market cap crash by more than $1.4 trillion, and bitcoin lose 64% of its value as the industry suffered a string of high-profile crypto bankruptcies including FTX and Three Arrows Capital.
The gains come even as shockwaves from the FTX collapse continue to be felt across the digital asset industry. As recently as last week, crypto lender Genesis Global filed for bankruptcy protection.
Crypto market capitalization had slid to a low of about $745 billion in late November, in the aftermath of the FTX implosion. A year earlier, the measure briefly topped $3 trillion at the height of the digital-asset frenzy in late 2021.
The latest crypto rally reflects a pickup in investor optimism across riskier assets including stocks, as cooling US inflation stokes hopes an end is in sight to the Federal Reserve’s most aggressive cycle of interest-rate increases since the 1980s. News that FTX has recovered more than $5 billion in assets to repay creditors also lent some support.
The annual rate of consumer-price increases in the world’s largest economy slowed to 6.5% in December, the latest data show, from a 40-year high reached last June. The Fed reduced the size of its rate hike to 50 basis points last month, after four consecutive increases of 75 basis points each.
An end to interest-rate increases would bode well for risk assets, as that means funding costs for investors and businesses would stop rising.