Crypto Assets Under Management Increase 36.7% in January As Markets Recover. But Grayscale Situation Remains “Delicate”
CryptoCompare’s latest Digital Asset Management review report stated that total assets under management (AUM), for digital asset investments, jumped 36.8% to $19.7 Billion in January. This is its highest level since May 20,22. According to crypto intelligence company, “bullish sentiment” was driven by liquidated short position and a favorable macroenvironment, according to CryptoCompare. This is reflected in the latest CPI announcement that saw Bitcoin reach $23,000, its highest price since August 2022.
CryptoCompare however noted that AUM remains 38.7% below the January 2022 level “due to a hard year for Bitcoin, traditional assets, and the wider cryptocurrency market”. It is widely agreed amongst analysts that the main trigger of 2022’s risk asset and crypto bear markets was a surprisingly aggressive hawkish shift in the policy stance of the US Federal Reserve and other major central banks in order to clamp down on a stronger-than-expected surge in global price pressures.
Grayscale Situation is delicate despite market’s revival
CryptoCompare pointed out that despite the January rebound in crypto market sentiment, which has also led to a rebound in crypto investment product AUM (AUM), CryptoCompare said that the situation relating Grayscale’s Bitcoin Trust is still delicate. CryptoCompare pointed out that GBTC is still the most popular Bitcoin investment trust product, accounting for 69.3% of total market share. However, “the discount associated Grayscale’s GBTC Trust was only slightly narrowed” in January.
The GBTC Discount refers to how much GBTC shares trade below their net asset values. As of 31st The GBTC discount in January was a shocking 42.29%. This is only slightly higher than the record lows of December last year in the 48% region. CryptoCompare explains how “the situation remains delicate”, Grayscale still facing difficulties due to “the bankruptcy announcement by its sister company Genesis resulting from exposure to FTX” and “the ongoing lawsuit against SEC to transform its Bitcoin Trust into ETF.”
Are Crypto Investors Being Scared by the Fed?
The latest CryptoCompare reports chimes in with the latest Weekly Fund Flows report from CoinShares. CoinShares reports that digital asset investments products saw their highest inflows since July 2022. Bitcoin accounted for $116 millions of these inflows. There was clearly a revival of interest among institutional investors in crypto investments.
This Wednesday, however, will be a test for that resurgence. The The Fed will release its most recent monetary policy decision At 1900GMT, the Fed is expected to increase interest rates by 25bps to a range of 4.50-4.75%. This would be another slowdown in rate hikes following Fed’s last meeting, which saw rates rise by 50 bps and 75 bps each at each of its four previous meetings.
January’s rally was driven by optimism about a more aggressive Fed, as inflation shows signs of cooling and forward looking economic indicators point to a possible US recession later in the year. Macro strategists warn that market optimism could have gone too far. The markets expect only one more 25-bps rate increase after today’s move, and rates will be cut later in the year. However, Fed Chair Jerome Powell could signal more hikes ahead and may oppose any rate cuts.
Traders should be prepared for an aggressive pullback in crypto price – this could present a new opportunity for longer-term bulls to buy the dip given the growing signs that the bear market of 2022 is over.