Why February Should Be a Great Month for Crypto

It's February 2 today and Bitcoin is trading at $36,000. After a volatility scare in the stock market last week, the S&P 500 has risen from $3700 to $3820 today. Overall, volatility is falling and there aren't imminent risks for risk assets in February.

The reason I believe there may be a big move up in crypto this month is the US dollar. The DXY index has been in a strong downward trend for about a year, yet, throughout January the DXY made a small upward movement.

It is likely that the longer term trend will resume in February, and Bitcoin's inverse correlation to the DXY will likely take it to new all time highs. Looking at Bitcoin's longer term chart, it's been consolidating throughout the DXY's January increase, so we can anticipate a significant move up.

Ethereum looks even better. It has been correlated to Bitcoin, but its relative strength has been gaining steadily. This is typical some time after the Bitcoin halving and has the tailwind of growing DeFi hype. I anticipate Ethereum will appreciate more than Bitcoin this month.

In my opinion, as always with the crypto markets, there's a small probability that it could dump at any time. A lot of the people I respect and listen to seem to be ignoring this possibility recently. It is actually still possible that the 4-year halving cycle bull market ends at any time. Unlikely, but possible, and should remain a part of a thoughtful investor's framework.