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Key Takeaways:
- Early year volatility across digital assets and equities has for now subsided; bitcoin rallied 10.4% and ether rallied 17.0% last week
- Crypto asset strength relative to equities was evident on Thursday as the S&P 500 declined 2.4% but bitcoin and ether traded flat; bitcoin and eth led the rally on Friday
- Bitcoin is being used by larger individuals and institutions, with transfers over $1m comprising 64% of daily transaction volume

The Focus
After a rough January in which bitcoin and ether declined 17.0% and 27.3% respectively, downside volatility has for now subsided, with both assets rallying 10.4% and 17.0% respectively by Sunday’s close.
It appears the moving past of the January Federal Reserve meeting has been so far positive for markets, with the broader consensus of five interest rate hikes now providing a roadmap for investors until the Fed indicates otherwise.
While equities experienced some volatility around earnings last week, bitcoin and digital assets were unfazed by the number of tech names that declined 5,10, and in some cases, 20% on a single day.
The recipe for the digital asset rally was Thursday’s trading: even as the S&P 500 and Nasdaq were down 2.4% and 3.7%, both bitcoin and ether traded flat (+0.1%, +0.3%).
This strength on the downside was likely noted by both bulls and bears, who either took the opportunity to buy the dip or remove shorts on a lack of further weakness. Buyers gave enough juice for both bitcoin and ether to close at $41,687 and $2,996 by Sunday night.
While the market remains sensitive to headlines, digital asset investors for now can be reassured of the asset class’s ability to bounce when conditions warrant.
Not surprisingly, the dates of these lows also coincide with the dates of the lows seen in major equity indices and assets impacted by monetary uncertainty.
An update to our “Tantrum Table” on page two highlights this correlation seen over the course of the last three or four months. As bitcoin and ether pulled back alongside risk-assets, the bounce has also been in tandem.
As illustrated on page two, bitcoin and ether have outperformed on this most recent bounce. This to us again highlights the macro-specific narrative of this pullback from all-time-highs.
Bitcoin and ether are now up 17.9% and 26.9% from their low closes on January 23rd and January 27th.
While monetary tightening and the ability to “party without the punch” remains a key theme of this year, strength, resilience, and an avoidance of a long, drawn-out bear market should provide investors with further reassurance around the legitimacy of this new, emerging asset class.
Realized Volatility and Implied Volatility Trending Downward
One may call this an orderly pullback, as short-term measures of volatility have been unaffected by the most recent drawdown from all-time-highs. In fact, implied volatility hit a high of 122% in the May 2021 volatility episode but rose to only 69% in this most recent drawdown.
These improvements in both realized and implied volatility will allow investors to justify larger position sizes to digital assets in the future.

Tantrum Assets Rally in Tandem
While these assets pulled back on concerns of the Federal Reserve’s process of normalization, they’ve also bounced off their lows at a very similar time: prior to or directly after the Federal Reserve’s January FOMC meeting. We continue to monitor these developments for signs of a robust, risk-asset rally.
Just as these assets declined in tandem, they’ve now experienced a synchronous bounce:

Bitcoin Network Sees Larger Transfer Sizes
Bitcoin is a global settlement network in which users can transfer value without a central intermediary.
While previously retail dominant, larger and larger transactions are now taking place on-chain.
Transactions above $1m now average 64% of daily transfer volume.
While this does not take away from the importance of smaller transactions and the opportunity bitcoin provides for micro-payments, large transactions taking place on the Bitcoin Network certainly improve its legitimacy.

Click here for the full PDF. As always, please reach out with any questions or comments.
Stay tuned,
Joseph Orsini, CFA
Director of Research