Market Wrap: Bitcoin Rises Above $38K Ahead of Seasonally Strong February

Bitcoin (BTC) returned above $38,000 on Monday as bearish sentiment faded. The cryptocurrency was up 2% over the past 24 hours, versus a 4% rise in ether (ETH) over the same period. Metaverse tokens MANA and SAND were up 17% and 9%, respectively, on Monday.

It appears selling pressure is starting to wane after a rough start to the year. In the bitcoin options market, the put-call open interest ratio, which measures the number of open positions in put options relative to those in calls, rose to a six-month high of 0.62 on Sunday. A higher put-call ratio is typically viewed as a contrarian indicator, suggesting bearish sentiment is near a peak.

Historically, bitcoin produces positive returns in February, which could offer some hope for bullish traders. Technical indicators suggest short-term buyers could remain active around the $35,000-$37,000 support zone, although upside appears to be limited toward $45,000.

Despite the recent price bounce, some analysts remain skeptical because macroeconomic and regulatory risks remain elevated.

"Regulation concerns arise as the Biden administration prepares to release an executive order in February to regulate bitcoin as a matter of national security," Marcus Sotiriou, an analyst at the U.K.-based digital asset broker GlobalBlock, wrote in an email to CoinDesk. "It is hard to predict whether this executive order will have a positive or negative impact on the industry."

"The situation in the crypto market remains very fragile. Bitcoin could end up falling for the third month in a row," Alex Kuptsikevich, an analyst at FxPro, wrote in an email to CoinDesk.

Over the past nine years, bitcoin produced an average return of 12% in February, and ended the month with a gain 86% of the time, according to data compiled by StockCharts. Generally, equities also perform well during the second quarter, which means investors could start to increase their exposure to speculative assets.

"We see a short-term setup forming for a bounce, especially on a close back above $40K BTC and $3K ETH" in February, QCP Capital, a crypto trading firm, wrote in a Monday report. The firm also expects market expectations for a U.S. Federal Reserve rate hike to moderate over the next two months, which could benefit equities and cryptocurrencies.

Still, historical returns is no guarantee of future returns.

Investors put money into cryptocurrency funds for a second straight week as the bitcoin market stabilized following one of its worst-ever starts to a year.

Crypto funds saw inflows of $19 million during the seven days through Jan. 28, according to a report Monday from the digital-asset manager CoinShares.

Notably, some $22.1 million flowed into bitcoin-focused funds last week, while Ethereum-focused funds suffered outflows of $26.8 million. Read more here.

Digital assets in the CoinDesk 20 ended the day higher.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.