Crypto Market Wrap For January, What To Expect In February

January 2025 has been a rollercoaster for the crypto market. It is marked by significant political and economic events that have sent waves through the digital currency landscape.

The month saw the inauguration of Donald Trump as the 47th President of the United States. It is an event that traditionally brings volatility to financial markets.

While the direct impact on crypto wasn’t immediate, Bitcoin, often seen as a hedge against political uncertainty, saw mixed reactions, but overall, the market remained resilient.

Michael Saylor’s Microstrategy continued its aggressive Bitcoin accumulation strategy. Over January, the company added over 23,000 BTC to its holdings, bringing its total to over 471,107 BTC.

This move was seen as a strong vote of confidence in Bitcoin’s long-term value. The accumulation occurred amidst a backdrop of a strengthening dollar, which typically pressures BTC’s value.

ETFs surged in trading volume, reaching a 10-month high. This increase was possibly influenced by the political changes and the perceived stability offered by regulated investment vehicles.

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The surge in ETF volume indicated a maturation of the crypto market, with more traditional investors entering the space.

Cryptocurrency trading volume saw peaks between January 5th and January 25th. It suggests high activity during these periods, likely correlating with the aforementioned events.

The sentiment saw a positive spikes coinciding with a price increase as well as drops.

Bitcoin saw a slight decrease of -4.33% over the past week. Other major cryptos like ETH, SOL, DOGE, and Tether showed mixed performance. stETH and TON slightly up while USDT stabilized.

FOMC Updates and BTC’s Potential Supply Shock

The Federal Reserve concluded its January 29, 2025, meeting by holding the federal funds rate steady at the 4.5% range, in line with widespread expectations.

This decision marked a pause in the rate-cutting cycle that had seen three consecutive reductions in 2024, totaling a full percentage point.

The focus of market participants was on the Fed’s guidance for 2025, with December projections suggesting only two 0.25% rate cuts for the year.

The FOMC’s decision coincided with a notable decrease in Bitcoin exchange reserves, potentially signaling a supply shock.

This development was seen as a bullish indicator for Bitcoin. Reduced supply on exchanges often correlates with price increases due to heightened demand.

During the press conference, Fed Chair Jerome Powell addressed the implications of the new Trump administration, particularly in light of President Trump’s recent demand for immediate interest rate reductions.

Despite the political pressure, Powell emphasized that monetary policy would remain data-dependent.

This stance comes amidst an annual US inflation rate that climbed to 2.9% in December. Core inflation dipped to 3.2%. The labor market also showed signs of cooling.

State of the Crypto Market as We Head into February

As February approaches, financial markets are poised for increased volatility.

The crypto sector, with Bitcoin leading the charge, might see a bullish trend due to the recent supply dynamics on exchanges.

Traditional markets, however, remain cautious, with investors closely watching for any shifts in Federal Reserve policy or unexpected economic data.

The interplay between inflation rates, employment figures, and geopolitical developments will likely dictate market movements.

Investors should prepare for a nuanced landscape where both traditional and digital assets could see significant fluctuations, influenced by the Fed’s next steps and the broader economic environment.