LMAX Digital volumes cooled off into the monthly close. Total notional volume for Tuesday came in at $290 million, 17% below 30-day average volume.

Bitcoin volume printed $126 million on Tuesday, 33% below 30-day average volume. Ether volume came in at $66 million, 24% below 30-day average volume.

Looking at average position size over the past 30 days, we’re seeing average bitcoin position size at $5,118 and average position size for ether at 2,745.

Volatility is finally showing signs of turning up from multi-month lows. We’re looking at average daily ranges in bitcoin and ether of $733 and $68 respectively.

It’s been an impressive start to 2021. Crypto assets have been very well supported, with bitcoin leading the charge, up 40% on the month. Ether hasn’t been far behind, putting in impressive gains of its own in January, closing out +33%. As far as the catalysts go, there were many of them responsible for fueling the explosive January performance.

On the crypto side, heading into 2023, there was a feeling from many longer-term market participants that whether or not the market had bottomed out, crypto assets were trading at highly attractive, heavily discounted prices. And so, many of these market participants looked to increase exposure into the new year.

Of course, the good news about all of the bad news of 2022, highlighted by a multitude of crypto implosions, was that the market was still standing after taking some heavy hits, once again proving just how resilient it was. This also left most of the bad priced in, leaving the balance of risk tilting back to the topside.

Global macro fundamentals were also at play. As 2023 got going, things began to look up around the globe. China initiated plans for a reopening, the Eurozone looked like it would be avoiding recession, Fed pivot bets were out in full force, and US economic data was looking healthy overall.

All of this led to a wave of demand for US equities and renewed downside pressure on the US Dollar. And as things stand, correlations between crypto and risk sentiment are still quite relevant. The uptick in global sentiment translated to fresh appetite for crypto assets widely considered to be maturing, emerging, and thereby risk correlated assets that would benefit in such conditions.

As we look ahead, the medium and longer-term outlook continues to shine bright, though on a shorter-term basis, we’re not convinced we’re out of the woods just yet. For one thing, the January run was an explosive one with prices running a little too far and fast. This sets up the possibility for a bout of correction and consolidation.

We also believe there is risk associated with a market that has been placing heavy bets the Fed will indeed signal an end to rate hikes. Should the Fed disappoint the market, or should we see signs of inflation shooting back up above forecast in the weeks ahead, it could trigger a renewed wave of risk off flow, which would once again open downside pressure on crypto assets.

Nevertheless, in the event such a dip does play out, we believe setbacks will once again be exceptionally well supported on the longer-term value proposition of this promising asset class.