January 2023.

This update intends to inform you about relevant market developments and market insights in the digital asset market.

	December	January	Delta
Total market (Billion)	$756 b	$1004 b	+32,80%
Bitcoin (dollar)	$16.525	$23.125	+39,93%
Ethereum (dollar)	$1.195	$1.585	+32,63%
Nasdaq 100 (points)	10.945	12.360	+12,92%
S&P 500 (points)	3.840	4.070	+6,12%

KEY TAKEAWAYS

The December Consumer Price Index (CPI) report was in line with economist expectation, causing a positive shift in risk sentiment
The Nasdaq rose more than 10% to 12,090 points in January and the S&P500 (S&P) rose more than 6% to 4,080 points
The cryptocurrency market started the year with a 33% rise in January 2023, recouping some losses
Digital assets average daily spot trading volumes recover 30%
Technical analysis of the longer timeframes (weekly and monthly) paints a positive picture for the coming weeks and months. An important onchain indicator, the ‘weekly hash ribbons indicator’, also gives a buy signal for the first time since August 2021
Net-positive stablecoin inflow / outflow signs that investor confidence in the digital asset market is slowly restoring
Adoptie case: AMAZON x AVALANCHE
Adoptie case: SHOPIFY NFT’s
Adoptie case: AMAZON GAMING
Adoptie case: PLAYSTATION NFT PATENT

Macro-economic Developments

In the first two weeks of January 2023, markets mainly anticipated falling inflation in the US, which was confirmed with Consumer Price Index (CPI) data released on January 12. The inflation rate fell from 7.1% in November to 6.5% in December 2022 – in line with analyst expectations – and trending down since June 2022.

These declining inflation rates confirmed to the markets that the measures taken by the US Federal Reserve (FED) to reduce inflation, are having the desired effect., With the expectation that the decline of inflation will continue, positive sentiment further increased. The market is pricing in the possibility that the Fed might change its hawkish stance – both in traditional markets and the digital assets market.

This news caused a positive shift in risk sentiment. January 2023 was an exceptionally good month for the financial markets. The Nasdaq rose more than 10% to 12,090 points in January and the S&P500 (S&P) rose more than 6% to 4,080 points.

In addition, sentiment in the market is also improving because of, among other things, the easing of corona measures in China, the continued demand for products in general and extremely low unemployment figures. Where the market had fear for an upcoming recession, the market is slowly taking into account that a recession will either be delayed, or might not take place at all.

Digital assets

The digital asset market followed the positive sentiment for financial markets in January 2023. Bitcoin (BTC) rose over 40% and closed its second-best January over the past ten years. While BTC still trades below its 2022 highs of $24.5K, the current rally has far outpaced all other relief rallies over the past years. Portfolio altcoins also benefited significantly in percentage gains.

The total value of the crypto market capitalization ended at $1.07 trillion for January, which was a 30% increase year-to-date (YTD) and broke back above the $1 trillion mark for the first time in two months. The uptrend suggests that the cryptocurrency market has become more resilient to negative news. For example, even when major lending firm Genesis Trading filed for Chapter 11 bankruptcy on January 19, the market seemed to have already priced in the fallout and continued moving upwards. Other contributing factors include the anticipation of a slowdown in rate hikes and a pivot in the Fed’s monetary policy as well as China easing Covid-19 measures as outlined above.

Although the total value of the crypto market is showing signs of resilience, we need to consider the fact that it is just a snapshot in time. Fundamental resilience, however, is something we see with venture capital investments. Despite the major drop in value of capital markets in 2022, venture capitalists invested more than $30bn into crypto and blockchain start-ups in 2022, nearly matching the $31bn invested in 2021. On an annualised basis, 2022 was still the biggest year for crypto VCs with more than $33bn allocated to over 200 funds. This growth represents a significant increase from 2021, which saw $19.4bn raised across 140 venture funds.

TECHNICAL ANALYSIS

Nasdaq and S&P have been in a downtrend (with lower highs) since January 2022. Both indices are in the process of reversing from this downtrend into an uptrend on the monthly and weekly timeframes.

The Nasdaq held a crucial support level of 10.800 points and is now bouncing to the upside from the lower EMA ribbon on the monthly timeframe. For the long term this is a signal for continuation of a long term uptrend. In January the Nasdaq formed a higher low on the weekly timeframe, which is a sign of bottoming and reversal for the medium term. With a close of 12.500 points, the Nasdaq is technically back above the 100 & 200 moving averages. For the S&P we see a similar picture.

While Bitcoin is leading the rally to the upside, the bitcoin dominance increased from 40% to 44%. Despite the major upside of Bitcoin in January with a 40% rise to $23.200, the weekly timeframe is still in a downtrend – Bitcoin still trades below the 100 and the 200 moving averages.

Bitcoin needs to break and hold the 28K USD level to confirm an uptrend on the weekly timeframe. Nevertheless, if bitcoin can stay above, either hold the 19-20K level as support, it will form a higher low on the weekly timeframe. This would be a very positive development for the months to come.

Another interesting fact is that the daily bitcoin CME futures market has formed future gaps at: 20K, 28.8K and 35.2K. The Bitcoin CME gap is the difference between the trading price of Bitcoin futures contracts when the market opens on Sunday, and when it closes on Friday. History shows that futures gaps very often, although not always, tend to get filled. So, we now have a magnet to the downside with the 20K CME gap pulling the price down, and two magnets to the upside (28.8K and 35.2K) pulling the price up. If all gaps are filled in this order, this would align with forming a constructive higher low before bitcoin moves up to 28K and beyond.

ONCHAIN ANALYSIS

Crypto spot trading volume has risen significantly. Total crypto spot trading volume in January 2023 reached $1.88 trillion, 50% higher than the $1.25 trillion in December 2022. This brings crypto trading volume back to pre-FTX collapse levels, slightly above the $1.83 trillion recorded in October 2022. However, these volumes remain 84.4% lower compared to January 2022 and 95.2% lower than the record high observed in January 2021.

Indicator 1: Hash-ribbon indicator

In January we have seen a very important and historically reliable indicator, the hash ribbon, flipping a buy signal. The Hash Ribbon is a market indicator that assumes that Bitcoin tends to reach a bottom when miners capitulate, i.e. when Bitcoin becomes too expensive to mine relative to the cost of mining. Historic data shows that since 2012 in 100% of 13 cases when the hash ribbon indicator flipped a bull signal, bitcoin started a period of significant upside.

Indicator 2: Net-positive Stablecoin inflow / outflow

Overall stablecoin inflow / outflow is net-positive (meaning more stablecoins were sent to exchanges than withdrawn from exchanges), a significant increase after months of continued worries about withdrawals due to the collapse of FTX and a sign that investor confidence in the digital asset market is restoring.

Another, remarkable pattern emerging is that stablecoins are primarily flowing into exchanges during (EU/US) business hours only, which could mean the heat signature of large European and American institutions are buying.

ADOPTION CASES

AMAZON WEB SERVICES x AVALANCHE

Amazon Web Services (AWS) has partnered with Ava Labs, the company building out layer-1 blockchain Avalanche, to help scale blockchain adoption across enterprises, institutions and governments.

The partnership intends to make it easier for individuals to launch and manage nodes on Avalanche while also aiming to give the network more strength and flexibility for developers.

AWS will support Avalanche’s infrastructure and decentralized application (dApp) ecosystem, alongside one-click node deployments, through its marketplace. The affiliation will also include Ava Labs joining AWS Activate, a program that helps startups and early-stage entrepreneurs get started on its platform.

SHOPIFY MERCHANTS CAN NOW DESIGN, MINT AND SELL NFTs

Shopify, world’s leading e-commerce platform for online stores, expanded its Non Fungible Token (NFT) integration, allowing its millions of merchants to begin designing, minting and selling Avalanche NFTs.

Using the Venly Shopify merchant app, retailers can sell NFTs with “minimal technical knowledge”. NFTs created by merchants are automatically turned into products that can be displayed and purchased on their storefronts, allowing merchants to sell NFTs directly from their stores instead of through third-party marketplaces. In addition, buyers are not required to have an existing crypto wallet and instead will receive an email with a link to a newly created blockchain wallet.

“Our growing blockchain ecosystem demonstrates our commitment to supporting merchants as they sell NFTs directly through their storefronts, helping to further grow participation in Web3 and expand what’s possible in commerce,” Christina Lomazzo, the blockchain ecosystem lead at Shopify, said in the release.

Shopify joins a growing number of mainstream platforms that have embraced digital collectibles. Instagram and its parent company, Meta Platforms (META), opened NFT minting and selling to a select group of digital creators in November 2022, and Reddit successfully launched its NFT marketplace in December 2022.

AMAZON TO ENTER CRYPTO NFT MARKET WITH GAMING INITIATIVE

Amazon reportedly aims to dabble into NFTs and Web3 gaming with an upcoming initiative related to digital assets.

The world’s largest retailer is planning to launch a “digital assets enterprise” focused on Non-Fungible Tokens and Web3 gaming this spring, Blockworks reported Thursday, citing four anonymous sources familiar with Amazon’s intentions.

Per the report, Amazon’s initiative is in the relatively early stages of development and the firm is expecting to make an official announcement in April. Furthermore, the e-commerce giant has more than a dozen partners lined up for the project, including layer-1 blockchains, blockchain-based gaming startups and developers, and digital asset exchanges.

“One example in the works, per one source: getting Amazon customers to play crypto games and claim free NFTs in the process,” the report said, adding that Amazon executives leading the initiative have reached out to at least one family office in recent months. They have also allegedly planned to conduct an NFT drop with an artist.

In April last year, Amazon CEO Andy Jassy told CNBC that he is optimistic about the future of cryptocurrencies and NFTs. At the time, he said the e-commerce giant was not looking into adding crypto payments, but he claimed he “do believe over time that you’ll see crypto become bigger.”

PLAYSTATION DIVES INTO NFT WORLD WITH NEW PATENT

Sony PlayStation has issued a patent suggests that the gaming giant may use non-fungible tokens (NFTs) as in-game assets, reigniting interest in the nascent technology.

Sony’s patent is titled “US20220358450 – Tracking Unique In-Game Digital Assets Using Tokens On a Distributed Ledger”. The abstract describes a system and method for tracking digital assets associated with video games, saying: “The digital assets may be in-game digital assets, such as in-game items or characters, and video game digital media assets representing moments of gameplay of a video game, such as video clips or images.”

It goes on to describe the usage of NFTs in gaming, specifically creating in-game assets, as well as making any changes to them, including their appearance and ownership.

CONCLUSION

January was a very strong month for both traditional markets and the digital assets market. Declining inflation rates confirmed to the markets that the measures taken by the FED to reduce inflation are having the desired effect. With the expectation that the decline of inflation will continue, positive sentiment further increased. The market is pricing in the possibility that the Fed might change its hawkish stance – both in traditional markets and the digital assets market.

From a technical analysis perspective, both Nasdaq and S&P show a potential trend reversal. Also in the digital asset market important technical indicators (such as the hash-ribbon indicator) show a potential trend change. However, digital asset market liquidity is still thin and on higher timeframes more confirmation is required to have a confirmed trend reversal.

The most important question for any market, including the digital assets market, is: what will be the FED response to inflation, employment, and housing data in the upcoming FED meetings, and what will be the market response? Without a confirmed FED monetary policy change, any scenario is still in play.

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