Bitcoin’s January rally is carrying on into February with investors hopeful that it has found a bottom after rising 10% in January, breaking $20,000 on Jan. 13. The world’s largest cryptocurrency by market cap has sustained a valuation above $20,000 benchmark over the last two weeks. 

Bitcoin regained its $21,000 valuation on Jan. 19, a price point not seen since Nov. 5, 2022, just before FTX disintegrated. It broke $23,000 on Jan. 25, and touched above $24,000 on Jan. 29 and again on Feb. 2. So, what’s driving bitcoin’s 14-day rally?

Fed raises rates

The Federal Open Markets Committee (FOMC) announced Wednesday that the Federal Reserve would raise interest rates by 25 basis points, from 4.50% to 4.75%, beginning Feb. 2. The Fed’s decision sent bitcoin, as well as several altcoins, skyward on significant gains. Bitcoin tested the all-important $22,500, a price resistance measure after regaining its $21,000, post-FTX sell-off.

The Fed’s announcement came on the heels of a 3-month lull in bitcoin’s price in which the massive liquidation of BTC after FTX opened the door for new investors to buy in. Moreover, the margin lending ratio of whales rose significantly between Jan. 29 - Feb. 2, further testing the $22,500 price point, proving bullish resistance against big sell-offs. Bulls are continuing to buy the dips in February, signaling investor confidence is growing. 

Bullish options traders

The bitcoin options markets give some of the most accurate BTC price data because it measures the resistance between bulls and bears most accurately. In the options market, traders have the opportunity, but not the obligation, to buy (call) or sell (put) at a future date.

This gives the most accurate trend data because it details current market sentiment based on where traders believe bitcoin is going in the near future. This is also expressed in the Fear & Greed Index where more fear indicates put options outweigh call options in terms of risk; if the inverse is true, then greed is outweighing fear.

Currently, the options market indicates that bitcoin will likely remain strong with bulls not allowing major sell-offs to drop the price below the $22,500 resistance benchmark. Margin traders are still shorting bitcoin as it has already broken $24,000 twice as of this writing. 

Bad news baked in

There was a bevy of bad news throughout 2022, yet savvy investors know not to buy or sell based on breaking news items. What is reported in the news is already ‘baked into’ a cryptocurrency’s price because the markets have already reacted to any raw data available, or any predictable fallout before it gets compiled into a news report.

For example, FTX’s bankruptcy was a largely unexpected event that upended the crypto markets. However, the ripple effects from FTX such as lawsuits, liquidity crises, and other bankruptcies, are not going to catch investors off-guard because they are predictable when a large company collapses. 

Macroeconomic factors

In addition to the Fed’s rate hike announcement, broader market conditions are sustaining the bitcoin rally. Global inflation, the war in Ukraine, and cross-border payment systems have all contributed to the usage of bitcoin. Like it or not, crypto adoption is rising among the middle and lower classes, who are affected by these and other events which can manipulate fiat currency valuation.

While the current rally is no moonshot, it is a positive indication that crypto – despite its extreme volatility – can still rebound after many earth-shattering events as occurred in 2022.