Is Winter Over for Digital Assets?

Over the weekend, the Bitcoin Fear and Greed Index reached a score of 52, the first time it had done so in 9 months.

The indicator peaked on January 15 at 52, which is neutral, marking its highest level since April 5. The move comes after a 24% increase in the BTC over the previous seven days.

In June 2022, the market sentiment tracker fell to a multi-year low of 9. Since then, it has remained in the “Extreme Fear” range of 20 to 30. The fear and greed index draws its motions and attitudes from numerous sources, including data from Google Trends, social media, market volume and momentum, and current volatility.

The index has fallen back to 45 as of the time of writing, dropping it back into the “Fear” category and indicating that confidence has not yet fully recovered.

With a 12-day run this month, Bitcoin has seen its second-longest winning streak. Since the start of the year, the asset has increased by 28%, wiping off all losses from the fall that followed the early November collapse of FTX.

The continued capital inflows into Bitcoin indicate the uptick in the cryptocurrency markets following the release of the latest consumer price index (CPI) for December in the United States, which reached 6.5% annually.

The news has been seen as evidence that the Federal Reserve is succeeding in its effort to contain inflation. This argument suggests that risky assets like Bitcoin may not continue negatively impacted by a strong drive to tighten monetary policy.

Investors continue to worry about where Bitcoin's price might go next despite recent upward momentum that reversed the overall effects of the FTX fall. In fact, the main issue is whether or not the bear market has ended.

Since Bitcoin is experiencing unfavourable feelings that could undo the recent gains, investors must continue to exercise prudence. For instance, bitcoin businesses have not yet fully recovered from the effects of the macroeconomic climate, as seen by their recent announcement of several layoffs and the potential formation of a House subcommittee on cryptocurrencies by the United States. Michal van de Poppe, a crypto trading analyst and specialist, noted that Bitcoin is still dealing with significant events that could affect the current rally. He advised investors to keep an eye out for data that impacts overall economic health, such as retail sales, in a YouTube video that was published on January 13. He added a warning that even though inflation figures are slowing down, the Fed may still raise rates if the general state of the economy is weak, which might impact consumers' purchasing power.

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