The cryptocurrency market started the year with a 30% rise in January 2023, recouping some losses.
The cryptocurrency market was down last year after numerous setbacks, falling 64% from $2.31 trillion at the start of 2022, to $829 billion by the end of the year.
Sentiment in the crypto market appeared to shift from bearish to bullish in 2023.
Total crypto market capitalization ended in the green at $1.07 trillion for January, which was a 30% increase year-to-date (YTD) and broke back above the $1 trillion mark for the first time in two months.
The uptrend suggests that the cryptocurrency market has become more resilient to negative news. For example, even when major lending firm Genesis Trading filed for Chapter 11 bankruptcy on January 19, the market seemed to have already priced in the fallout and continued moving upwards.
Other contributing factors include the anticipation of a slowdown in rate hikes and a pivot in the Fed’s monetary policy, after positive data on a potential peak in US inflation, as well as China easing Covid-19 measures.
Crypto trading volume in 2023 has returned to the levels before FTX’s collapse
On the back of crypto prices going up, spot trading volume in the crypto market has also risen significantly. Total crypto spot trading volume in January 2023 reached $1.88 trillion, 50% higher than the $1.25 trillion in December 2022.
This brings crypto trading volume back to pre-FTX collapse levels, slightly above the $1.83 trillion recorded in October 2022.
The recent rally in the crypto market might not mean that prices have bottomed
While the total crypto market cap has recovered from the November 2022 lows of $821 billion, it remains to be seen whether this rally will last.
Liquidity in the crypto market remains thin, indicating that not all investors share the same bullish sentiments and many are still waiting on the sidelines. Meanwhile, cryptocurrency companies have been reducing headcount or even shutting down due to challenging conditions, as sectors across the broader economy continue with cost-cutting measures too.
The study examined total cryptocurrency market capitalization data from CoinGecko, which sums up the market capitalization of 12,375 cryptocurrencies tracked across 647 exchanges, as of January 31, 2023.
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Curious to find out more about our previous research studies? Check out this one on crypto adoption last year, based on the number of BTC and ETH addresses.
Shaun is a Research Associate at CoinGecko with a fondness for memes and farming on the blockchain. Follow the author on Twitter @ShaunPaulLee