January spooked the market amid a selloff that kept feelings damp. According to the latest CryptoCompare report, Bitcoin and Ethereum fell 23.3% and 36.9%, respectively, in the month to January 27.
The downward spiral of price
Most of the tokens were trapped in a downward spiral after their November peaks. Several reasons are thought to be behind the prolonged winter in the crypto-space. The Fed’s tapering announcement and fear of interest rate hike followed by the Bank of Russia’s anti-crypto stance, the SEC’s clampdown on spot ETFs, and wider market weakness. The report stated,
“Macro sentiment around risky assets has been the main narrative in markets, with expectations of a significant reduction in quantitative easing after a record annual CPI inflation figure of 7.0% in the US in December 2021.”
Galina Likhitskaya, Vice President of Operation & Products at HashEx, told AMBCrypto that the current situation is very different from the events preceding the last crypto-winter. However, she did note that we have already seen a similar fall in 2021 back in May, June, and July. Following the same, Likhitskaya mentioned, “an even more rapid growth of the crypto industry began.”
The outings continued
It should be noted that fund flows have also been negative since the end of December. The report revealed that average weekly releases reached $88 million. And, January saw the highest outflow to the tune of $207 million in the first week against the outflow of $238 million in the first week of June. While BTC topped the outflow chart, Solana managed inflows during the period, the report notes.
If we look at the CoinShares’ weekly flow report till 21 January, altcoins like Cardano, Polkadot, and Solana saw inflows totalling $1.5 million, $1.5 million, and $1.4 million respectively. Bitcoin saw an inflow totalling $14 million during the same time, reminding of a possible recovery after five weeks of outflows.
Trading volumes have plummeted
When we talk about the average daily trading volume, it also dropped during the month. FTX.US President Brett Harrison previously noted in an interview with Bloomberg that during periods of declining volume, moderate trading activity is seen following a decline in prices in general. In January, the average daily trading volume reportedly fell 14.5% to $481 million.
CryptoCompare’s report also noted that the largest decreases in individual product volumes came from VanEck’s VETH and Grayscale’s ETHE Ethereum funds that fell by 38.9% (to $3.91 million) and 34.8% (to $139 million), respectively. This was in line with the fall in AUM or Assets Under Management.
We previously reported that Grayscale’s second-largest fund, Grayscale Ethereum Trust, reported AUM of $11.6 billion on December 31. As of January 21, the AUM has fallen to $8.9 billion. As of January 31, it has fallen further to $7.5 billion.
Having said that, David Marcus, the former crypto head at Facebook (Now Meta), seems to believe that it is indeed “Crypto Winter.”
