Bitcoin (BTC) hovered around $23,000 on February 1 after recording its best January performance in a decade.

BTC/USD 1 hour candlestick chart (Bitstamp).Source: Trading View

The end of the Bitcoin bear market is the ‘default view’

According to data from Cointelegraph Markets Pro and TradingView, BTC/USD closed monthly at around $23,100, the highest since July 2022.

According to Coinglass stats, the largest cryptocurrency is up 39.6% in the first month of the year.

BTC/USD monthly return comparison (screenshot).Source: Coinglass

The impressive performance has encouraged the bulls, many of whom have maintained their confidence despite major concerns from more conservative market participants.

Trader, Entrepreneur and Investor Bob Lucas reacted.

“I mean, anything can happen, right? But the absolute default view has to be the bear market that ended in December.”

As reported by Cointelegraph, opinions are quite divided on how Bitcoin will behave in February, with one trader expecting a return to “bearish” conditions after five-month highs. There is

The outlook for the month ahead remains clouded by macroeconomic factors. Notably, on February 1st the US Federal Reserve will confirm the next rate hike and the European Central Bank will do the same on his February 2nd.

A 25 basis point (bps) rate hike by the Federal Reserve has been priced in almost “unanimously,” but cryptocurrency research and analysis firm Arcane Research says the future remains uncertain. increase.

A blog post published Jan. 31 argued that “a relatively strong market recovery could give Fed Chairman Powell an advantage to maintain a hawkish, restrictive tone.” He added that the consensus “expects a rate hike of 25 basis points.” Another 25bps increase on Wednesday, and on March 22nd he will be up to 475bps. ”

“A further 25bps rate hike is still within the realm of possibility, although a zero adjustment at the May 3 and June 14 FOMC meetings is currently priced in as the most likely outcome,” he said. .

Expectations for a 25bps rate hike totaled 99.3% at the time of writing, according to CME Group’s FedWatch Tool.

Fed Target Interest Rate Probability Chart. Source: CME Group

If a surprise door is opened, volatility could rise as a result, and the decision to raise rates is already a classic catalyst.

Nonetheless, Arcane showed that volatility around the Fed’s move has diminished with each rate hike.

“This could suggest that the trend of massive BTC volatility triggered by the FOMC is reversing,” it concluded.

Bitcoin volatility comparison table (screenshot).Source: Esoteric Research

Dollar Strength Key Rebound

Another concern regarding cryptocurrency performance is the strength of the US dollar.

RELATED: Best January Since 2013? 5 Things You Need To Know About Bitcoin This Week

In last week’s market update, trading house QCP Capital warned subscribers that the US Dollar Index (DXY) was experiencing a “massive positive divergence”.

DXY, which has historically been inversely correlated with risky assets, has been on a downward trend since mid-2022, but stopped losses early in the year.

“This is the same setup we saw on BTC/ETH in December, where the breakout to the topside is very sharp and violent,” wrote QCP.

US Dollar Index (DXY) 1-day candlestick chart.Source: Trading View

The views, thoughts and opinions expressed herein are those of the authors only and do not necessarily reflect or represent the views or opinions of Cointelegraph.