Cryptoverse: Big investors edge back to bitcoin

After a banner month for bitcoin, large investors are putting their toes back into the cryptocurrency seas.

According to statistics from asset management CoinShares, institutional investors, who often prefer digital asset investment products, witnessed inflows of almost $117 million last week, the largest weekly rise since last July.

With funds tracking it accounting for $116 million of that, Bitcoin was by far the greatest attraction. Total assets managed by cryptocurrency funds have increased to $28 billion, up 43% from lows seen in November when the FTX exchange collapsed and rocked the sector.

The majority of individuals have greater confidence now than they had a month ago, according to Enigma Securities financial advisor Joseph Edwards.

The first cryptocurrency, Bitcoin, has increased by about 40% in January and is on pace to have its greatest month since October 2021 and second-best January in the last ten years.

Some investors are hopeful that the protracted crypto winter may finally be nearing spring as a result of the surge and a potentially improving macro picture. The U.S. Federal Reserve is expected to raise its benchmark rates by 0.25% this week, the lowest increase since their tightening cycle started last year, according to many investors.

As the inflation-focused rate-hiking cycle comes to an end, long-term interest rates might decline if peak inflation is actually behind us for the time being, according to analysts at Fidelity Digital Assets.

"This might indicate favorable macro momentum for assets like bitcoin."

According to cryptocurrency liquidity provider B2C2, activity in the options market showed traders were rushing to put bets immediately after the Fed meeting, a measure of the significance the market is placing on it.

According to CoinShares, the average weekly volume of cryptocurrency trading has increased by 11%, signaling a rebound in activity following many months of sluggish trading.

However, cryptocurrency is far from out of the woods, and if the Fed adopts a more alarmist stance this week, it may still ruin the fun.

The bitcoin Fear & Greed index of cryptocurrency analytics platform Coinglass, where 0 represents severe fear and 100 represents extreme greed, is now sitting at 61, the highest level since mid-November 2021, just after bitcoin started to decline from its peak.

Next week or two, Edwards said, "we could see a drop off, but how deep that dip goes is debatable."