Crypto-assets under management jumped 36.7% in January as markets rallied, but grayscale situation remains ‘tricky’

Total assets under management (AUM) for digital asset investment products jumped 36.8% to $19.7 billion in January, its highest level since May 2022, CryptoCompare said in its report. latest monthly digital asset management report. According to the crypto-intelligence firm, “Bullish sentiment was driven by liquidated short positions and a supportive macro environment, reflected in the latest CPI announcement, which saw the price of Bitcoin hit $23,000; its highest level since August 2022”.

However, CryptoCompare noted that the AUM is still 38.7% below its January 2022 level “due to a difficult year for Bitcoin, the broader cryptocurrency market, and traditional assets.” It is widely believed among analysts that the primary trigger for the 2022 risk asset and crypto bear markets has been a surprisingly aggressive hawkish shift in policy stance by the US Federal Reserve and other major central banks in order to quell a stronger than expected situation. mounting global price pressures.

Tricky grayscale situation despite market recovery

Despite the boost in crypto market confidence in January, which also led to a rebound in crypto investment product AUM, CryptoCompare noted that the situation regarding Grayscale’s Bitcoin Trust (GBTC) remains delicate. While GBTC remains the dominant bitcoin investment trust product by AUM, with a market share of 69.3%, CryptoCompare noted that “the discount associated with Grayscale’s GBTC Trust has only narrowed slightly ” in January.

The GBTC discount refers to the percentage that GBTC shares are trading below their net asset value. From 31^st of January, the GBTC rebate was a staggering 42.29%, slightly above the record lows printed last December in the 48% zone. CryptoCompare explains that “the situation remains delicate” with Grayscale facing challenges such as “the announcement of the bankruptcy of its sister company Genesis due to exposure to FTX in January, and the ongoing lawsuit against the SEC to convert his Bitcoin Trust in ETF”.

Will the Fed scare off crypto investors again?

Latest CryptoCompare Report Rings With Latest Weekly Fund Flows CoinShares report. According to CoinShares, digital asset investment products recorded their largest inflows since July 2022 last week, with Bitcoin dominating and accounting for $116 million in admissions. January clearly saw a renewed appetite among institutional investors for crypto investments.

But this resurgence should be put to the test this Wednesday. The The Fed is expected to release its latest monetary policy decision at 1900 GMT and is expected to raise interest rates by 25 basis points to reach a target range of 4.50-4.75%. That would mark another slowdown in the pace of rate hikes after the Fed raised rates by 50 basis points in its last meeting and 75 basis points in each of its previous four meetings.

Optimism for a less aggressive Fed, as inflation shows significant signs of easing and forward-looking economic indicators point to a likely US recession later this year, has been a key pillar of the recovery. of January. But macro strategists warn that market optimism may have gone too far. Markets expect just one more 25 basis point rate hike after today’s decision and rate cuts later this year, but Fed Chairman Jerome Powell may signal more upcoming hikes and may postpone the idea of ​​rate cuts later this year.

Traders should prepare for the risk of an aggressive near-term pullback in crypto prices – for longer-term bulls, this could present a fresh opportunity to buy the dip, given signs of growth than the 2022 the bear market is over.