Should Bitcoin's Return Above $100K Put Crypto Back in Celebration Mode?

With Bitcoin's market value back above the coveted support level of $100K (for now), we need to take a look at where crypto market health stands as we turn to the second half of January.

There are three key political/economic stories, among many others, that we should be keeping an eye on right now.

• Donald Trump's inauguration on January 20th and changing SEC policies surrounding crypto once he takes office
• The US Fed's next moves with interest rates after a "hawkish" stance at the FOMC meeting in December, and an encouraging CPI report showing reduced inflation on January 15th
• The ceasefire between Israel and Hamas (see below)

All three of these topics are swinging sentiments bullish at the time of this writing, but can of course have new developments. We will continue to keep tabs on them in our upcoming pieces of content.

As for on-chain metrics and other vital signals to watch:

The accumulation of wallets holding at least 10+ BTC appears to be resuming, which is a very welcome sight after sudden stagnation in the second half of December and first week of January. Prices often follow this bright green line in the long-term, so this helps justify that crypto's latest rebound is genuine. However, be mindful of the declining Tether (red line) and USD Coin (blue line) by key stakeholders. We'd still like to see these begin to pick up again.

Along the same topic, the total amount of non-empty wallets has been shrinking over the past six weeks, with many small retail traders taking profits and hoping to get lucky by timing the top. The total amount of wallets are largely comprised of very small wallets, who are typically getting their timing wrong. Over the history of Bitcoin, we have often seen the biggest rallies get started when this number is on the decline, especially when whales are scooping up the coins being shed by FUD'ing retailers.

Funding rates are very important to watch, and we've been seeing a trend of increased shorts starting to pop up in the same way we saw in late September and early October. This latest rally may liquidate some of them, but there are a healthy amount of non-believers in the market right now. This is a necessary ingredient for markets to rise, because prices historically move the opposite direction of the crowd's expectations.

Lastly, keep an eye on how conversations across social media are shifting between Layer 1's, Layer 2's, and meme coins right now. Market tops often occur when voices and interests are being drawn toward speculative assets with little intrinsic value or development teams. On the contrary, when Bitcoin and blue chip assets are getting most of the attention, it is a sign that healthy growth for all of crypto may be on the horizon.

As of now, the level of discussions toward Layer 1 and Layer 2 projects are middle of the road. But it is encouraging that the crowd has not been showing much FOMO toward meme coins at all after traders were rocked by major dumps over the past 4 weeks (prior to today). Let's see if this trend can continue after markets have shown signs of a legitimate rebound.

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Disclaimer: The opinions expressed in the post are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.