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Q9 Weekly | Mass x Velocity = Momentum

Q9 Capital
5 min readFeb 2, 2023

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2 February 2023

  • Best Jan for crypto in a decade
  • Volumes, momentum and sentiment increase
  • Largest crypto fund inflows in six months

Momentum has picked up in crypto markets. With a gain of 39.4%, Bitcoin closed out its best month since a 40% rally in October 2021 and its best January since 2013, when crypto was in its infancy. Currently trading at $23.7k, BTC is at its highest level since August of last year.

Bitcoin climbed again yesterday in the hours following the Fed’s FOMC meeting which saw a modest 25bps interest rate rise (caveated with a warning “ongoing increases” will be needed to bring inflation under control). Equity and crypto markets rallied as traders focus on a smattering of dovish notes from chair Jay Powell.

Across spot exchanges worldwide, monthly crypto volumes have risen to $5.6tn, which is up 61% since the end of last year, according to Nomics.

Smaller coins like Solana, Axie Infinity and Decentraland have doubled in value over the month, part of a $280bn January climb in digital assets overall. The outperformance of small-cap coins vs BTC is a sign that risk appetite is returning.

Monthly Returns, BTC/USD

Source: Bloomberg

Total Market Cap of Crypto, YTD

Source: CoinMarketCap

The Crypto Fear and Greed index has turned bullish and entered “Greed” for the first time since March last year. The index is made up from a combination of indicators including volatility, momentum, volumes, social media, dominance and trends.

Source: Crypto Fear and Greed Index

Institutional investors are once again pumping money into crypto funds amid the pickup in market sentiment. Digital-asset investment products saw $117mn in inflows last week, the largest amount in six months. The focus was almost entirely on Bitcoin, which saw $116mn of the inflows. The total AuM of crypto funds has risen to $28bn, up 43% from November 2022 lows.

Weekly Crypto Asset Flows (US$m)

Source: CoinShares

Flows by Asset (US$m)

Source: CoinShares

ETH options markets are also trending bullish with call options dominating 65% of volumes, up from 50% during the FTX collapse.

ETH Options Volumes

Source: Kaiko

The dollar index (DXY) has depreciated by 9% in the past 12 weeks, a steep decline that has brought further cheer to risk assets, including crypto. However, the greenback has previously bounced after sharp declines of the magnitude seen in recent weeks, meaning the rally in crypto markets may soon hit the wall.

Dollar Index 12-Week Percentage Range of Change Since 1990.

Source: Morgan Stanley

Coin Deep Dives

If you want to deep dive into the state of certain coins/tokens, Messari’s quarterly research reports on tokens are coming in thick and fast. Click the links below to get more colour on the projects…

It’s Behind You!

The worst of the damage seems to has been inflicted post-FTX and investors are relatively confident that there are no more shops to drop, as reflected in the muted reception to the Genesis bankruptcy and a spate of lay-offs across the industry. Risk appetite is starting to slowly return.

The rebound from last year’s deep rout is also part of a wider revival in risk appetite on expectations that central banks will now slow interest-rate hikes and perhaps even cut borrowing costs later this year as high inflation moderates.

Incoming crypto regulations are also becoming clearer. Just this week the White House unveiled a new framework on regulating digital assets; Britain set out its plans to regulate the crypto industry, and Hong Kong is set to demand mandatory licensing for stablecoin issuers this year.

However, the comeback of speculative assets could reverse if oil, wages and consumer-price increases shift the soft landing narrative in coming weeks. Some corners of global markets are still flashing warnings — ie: hedge funds have built up the biggest bearish bet on bond futures on record, clashing with the narrative that a peak in rate hikes is near.

Headwinds still exist but, all-in-all, 2023 feels like a year of new beginnings, with emerging clarity as to bankruptcy proceedings, corporate restructurings and market fundamentals pointing to the pantomime being behind us.

In the News…

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Q9 Capital
Q9 Capital

Written by Q9 Capital

40 Followers
2 Following

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