Last week was again a positive one for crypto, with the Nasdaq Crypto Index (NCI) closing Sunday (01/29) 3.6% above its prior weekly close. Most of the gains came from the 4.9% gain in bitcoin (BTC) while ether (ETH) finished the week with a 0.7% increase. The week began with BTC reclaiming the $23,000 level on Monday and remaining around that level throughout Tuesday. However, markets experienced a 3% decline on Tuesday, with BTC dropping below $22,500 and ETH nearing $1,500.
The downward trend on Wednesday may have been caused by underperforming stock markets, particularly in the tech sector, following mixed investor reactions to the beginning of the earnings season. Microsoft, for example, released lower-than-expected forward guidance as investors awaited new US economic data.
On Thursday, traditional markets recovered after the release of the Gross Domestic Product (GDP) data for the fourth quarter of 2022, which showed a 2.9% growth. While figures were stronger than expected, they still represented a slowdown from the 3.2% growth seen in the previous quarter. However, this solid growth may, for the time being, weaken the narrative that a recession is underway. Additionally, jobless claims, a proxy for layoffs in the US, decreased by 6,000, indicating a still-tight labor market.
Digital assets remained largely unaffected by the macroeconomic data, with BTC remaining close to the $23,000 mark and ETH hovering around $1,600. The positive performance of stock markets on Thursday, particularly the Nasdaq, following Tesla's strong results announcement, might have helped to create a more optimistic sentiment among investors. Although crypto was relatively calm on Friday and Saturday, Sunday brought a positive momentum to the asset class, with BTC reaching its weekly peak just below $24,000 and other assets reaching their respective highs for the week.
With one day left in January, we’re on the verge of recording the third best month in the NCI’s history, an upside only seen during the bull phase of the cycle that ended in November 2021.
For this week, all eyes will target the Fed meeting on Wednesday (02/01/2023), with an expectation of a 25 bps hike (leaving the Fed’s target rate in the range from 4.50% to 4.75%). Also, given the fact that year-over-year inflation has been consistently decreasing over the past few months, analysts expect the speech by the Fed’s Chairman Jerome Powell to bring hints on how much more the Fed will tighten monetary policy.
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