The situation in the cryptocurrency market looks positive. In particular, Bitcoin’s exchange rate surpassed the $24,000 level tonight before correcting slightly.

Hourly chart of Bitcoin exchange rate

And this is how the rates of major cryptocurrencies look like by market capitalization, i.e. the product of the rates by the number of coins in circulation.

Changes in cryptocurrency rates over the past 24 hours

The reason for positive market reaction was yesterday’s decision during the Federal Open Market Committee (FOMC) meeting. On it representatives of FRS raised the basic interest rate by 25 basis points or 0.25 percent. The last time the rate was raised by 25 basis points was in March 2022. This was followed by several hikes of 75 basis points and one increase of 50 basis points in December 2022.


The benchmark interest rate determines the cost of loans that commercial banks take from the Central Bank. The higher the rate, the more expensive the money becomes, which means that it becomes less profitable to borrow. This, in effect, slows down the development of businesses, leads to layoffs and a shrinking economy as a whole. However, it is more and more difficult to get funding under such conditions - hence the need for austerity.

An increase of 25 basis points does not mean a complete victory over inflation, but the reduced rate of increase of the key rate is still a positive sign. They mean that the peak in inflation may indeed have passed, so the economy will improve in the long term. However, it is important to be aware that the effects of an aggressive rate hike of 75 basis points in the second half of 2022 will still be felt, but the reduced rate of increase hints at a reversal in any case.


This, in turn, opens up space for risky assets. Cryptocurrencies are among the latter.

What’s going on with Bitcoin?

January saw a historic record reduction in the number of short positions, i.e. shorts. At least 85 per cent of them were liquidated.

Liquidating positions on Bitcoin

As a reminder, the liquidation of a margin position is a forced purchase of an asset by an exchange when the collateral on the trader's part is no longer sufficient to cover the position with the money he has borrowed from the platform. Consequently, Bitcoin's sharp upward price movement came as a surprise to many traders, leading to a massive liquidation. Which means they were betting on a market crash, while the latter decided to move in the opposite direction.

As the liquidation of shorts implies a forced buying of the asset, it also helps the local price rise. All in all, there were three major waves of mass liquidations in January, the largest of which resulted in shorts closing for $165 million in a single 24-hour period. The total amount of positions liquidated during the month was $495 million.

Liquidation of shorts in January

After all these events market players began to be more inclined to open long positions, i.e. longs. According to Cointelegraph’s sources, 51.46 percent of all positions were longs as of Jan. 30.

Balance between longs and shorts

Mass liquidation of shorts also led to growing optimism in the market. Here is how analysts at Glassnode comment on this situation.

Both the perpetual swaps and the calendar futures are at year-end plus 7.3% and 3.3% respectively. This follows a reversal in all futures markets for much of November and December. So there has been a return of positive sentiment – possibly with a touch of speculation.

In the chart below, the blue line shows the average difference between the futures value and the Bitcoin spot price, while the chart shows the corresponding fundings rate. As a reminder, fundings are periodic payments of short position holders to long position holders and vice versa, depending on market conditions. If the market is rising, long position holders pay downwards, and vice versa.

Futures data

At the same time, bitcoin balances on exchanges reached their lowest level in the last few years, at 2.25 million BTC on 21 major trading platforms. The last time this low was recorded was in February 2018.

The distrust of centralised trading platforms, which emerged after the collapse of the FTX exchange, is clearly a factor here. Although months have passed since then, many digital asset owners have somehow moved to store it properly, i.e. on hardware wallets.

BTC balance on exchanges

Another chart below shows total coin outflows and inflows to exchanges. As you can see, after the aforementioned FTX bankruptcy, coin outflows from exchanges reached an all-time high. This makes sense – the collapse of such a big brand among centralized trading venues significantly undermined traders’ confidence in them, so they decided to be more careful.

Cash inflows/outflows on exchanges

In addition, investors who bought Bitcoin after 2019 – that is, at a price above $21,800 – can now sell their coins on the plus side. Until a few weeks ago, the situation was much tougher: back then, Bitcoin was trading below $18,000, so only those who bought the cryptocurrency around 2017 or earlier could sell it at a profit.

Average BTC withdrawal price from exchanges

As you can see, positive signs of Bitcoin’s continued growth are evident in both exchange turnover statistics and transaction data on the blockchain. At the same time, the price of the main cryptocurrency continues to assault the $24,000 level. Naturally, its breakthrough will prove to be an important achievement for the current bear market.


We believe that conditions for the cryptocurrency industry are positive right now. Yes, Fed officials plan to continue raising key rate throughout 2023, but the reduced rate of increase after the 75 basis point hikes is a positive in any case. The current situation as a whole adds more and more confidence that the crypto market may have already hit its bottom in this bear cycle. Whether this is true or not, we will check it out in practice anyway.