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Home Blog January 2023 Market Review
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Article by Matt
2 February 2023 (Updated 22 June 2024)

January 2023 Market Review

It's time to take a step back and look at the current state of the crypto market and where things might be heading in the next few months.
January 2023 Market Review
  • Crypto market shows signs of recovery
  • 2nd longest crypto bear market at 413 days
  • Rate of FED interest rate rises reducing indicating that FED pivot may be getting closer.

After over 400 days of relentless bear action in the crypto markets, January finally saw crypto prices start to recover. Crypto prices have been falling since 9 November 2021 and this is the second longest bear market in crypto history. The longest bear market was 427 days back in 2014 / 2015.

The recovery has been more bullish than many were expecting and many crypto markets are currently looking very overbought. A pullback is very possible in the coming months, but overall it is very encouraging to see the market start to find a bottom from which it can rebuild.


Top Cryptos Price Movements

Bitcoin has performed very well over the course of January with a total increase of over 43%. The best performer in January was Cardano with a total increase of over 59%.

Monthly price movements for the major cryptocurrencies

Trading volume for the major cryptocurrencies


Crypto Market Performance vs GOLD vs S&P 500

Both the stock market and precious metals have shown signs of recovery during January. This is due to anticipation of the FED halting its interest rate rises. Crypto still remains significantly down over the last 12 months compared to gold and the S&P 500. Obviously this is off the back of massive crypto gains in 2021.

12 month performance of crypto vs gold vs S&P 500



The official rate of inflation in the US is now firmly in decline. Meanwhile inflation in Europe remains very high across the board. Of course, this is based on the official inflation methodologies in each country which almost always grossly undervalue inflation. The true rate of inflation felt by ordinary people is estimated to be double the official rate.

Annual inflation for key countries over the last 40 years


Interest Rates

Central banks continue to aggressively raise interest rates. At the time of writing the US has just raised interest rates to 4.75% and the UK has just raised interest rates to 4%. This represents a 0.25% increase in rates in the US, which is the smallest rate rise in months. Whilst the US FED continues to say that more rate rises are on the way, this slowing of rate rises is being interpreted as bullish by most markets.

Interest rates for major central banks over the last 40 years


Currency Values

The US dollar continues to lose value, which in return sees an increase in the value of most other currencies. The problem for the US is that a weakening Dollar will increase import costs for the US which is likely to add inflationary pressure to the US economy.

Value of the US Dollar, Euro, Japanese Yen and Pound sterling over the last 12 months


US Inflation

Despite US interest rates continuing to rise and inflation continuing to fall, inflation still remains higher than interest rates. Ordinarily, the central banks will look to raise interest rates above the rate of inflation in order to bring inflation under control. If the current rate of change continues then this point is likely to be achieved somewhere around April / May 2023.

US inflation vs interest rates over the last 40 years


When Will the FED Pivot?

So when will the FED pivot and stop raising rates altogether? The CME Group continues to forecast US interest rates peaking at 5.1%. This matches with the likely intersection point on the previous interest / inflation rate chart.

Chart showing the anticipated peak us interest rate

The CME Group forecasts that the pivot will take place in 182 days time, which would be July 2023.

Chart showing the days remaining until the FED pivots

Even though the peak in interest rates is still several months away, the simple facts that the rate of increases is reducing and a FED pivot is likely to take place in the first half of this year are enough to already be stimulating the markets.

However, it does bring into question crypto's role as an inflation hedge, as it is currently being perceived as a risk-on asset. If markets are recovering then crypto is at the leading edge of that recovery. If the recovery continues then we can expect to see the higher-risk end of the crypto market (altcoins) outperform BTC and ETH.

The FED has continued to manage to reduce its balance sheet, although it still remains massively inflated compared to pre-2008. The real challenge will come when the US government looks to the FED to fund it's latest tranche of deficit spending. It is very unlikely that the FED will continue to be able to reduce its balance sheet beyond in the medium term.

FED total assets over last 40 years chart

Official US unemployment remains low, but it becomes increasingly hard to believe these figures given the massive layoffs announced across the tech sector and traditional retail. Unemployment is well known as a lagging indicator, so we may start to see these layoffs appearing in the official figures in the coming months. It's worth keeping in mind that the FED has a dual mandate: to reduce inflation, but also to maximise employment. if unemployment starts to rise then it will increase pressure on the FED to halt rate rises.

US unemployment over last 40 years

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