Review of January and February 2023: Bitcoin closed up 41.7%, with a maximum amplitude of 53.6%

After a strong counterattack in January and a sharp decline in February, Bitcoin had a good ending in the first two months of 2023. It opened at 16.6k in January and closed at 23.5k in February, a 41.7% increase in both months. The lowest price in January was 16.5k, and the highest price in February was 25.3k, with a maximum amplitude of 53.6%.

Two months into the new year, it has basically approached the low value of this year’s price outlook level (see “Bitcoin 2023 Price Outlook” [link], Liu Jiaolian, 2023.1.16; “Bitcoin Aims at 25,000” [link], Liu Jiaolian, 2023.2.16).

I still remember that in November and December 2022, when Bitcoin was in the abyss, there was a lot of short selling and bearish voices in various communities, which made the bulls almost unbearable. However, in January, there were several consecutive big positive lines, and the bears suddenly became silent.

According to a report by Glassnode on January 9, Bitcoin's realized volatility in December reached 24.6%, close to its historical low. Unlike the memory of many people who have been in the stock market that "a long period of sideways movement will inevitably lead to a fall", when Bitcoin's volatility is low, it often means that it is accumulating strength to counterattack. See the figure below.

By January 16, as Bitcoin made a comeback, the realized prices of short-term/long-term holders (with 155 days as the boundary) had all realized profits, and the market showed a bottom rebound pattern similar to that in early 2019. This means that those who waited with short positions in November and December 2022 may have really missed out.

When the price of Bitcoin broke through 23k on January 23, people began to discuss whether this was a bull trap. Data analysis showed that miners had finished their accumulation in January and began to sell off (perhaps it was because they did not sell their coins in time during the bull market, which caused psychological trauma?). However, long-term holders were still firmly absorbing the coins.

At this time, rumors have already begun that the Fed will halve the interest rate from 50bp to 25bp at the end of the month. However, the news that retail investors hear is always behind the price. As it turns out, the current price, 23k+, is the price in late January. (Liu Jiaolian's article on January 26, 2023, "Will the Fed release a peace dove?" [link] records the market news, sentiment and price fluctuations at the time)

The result of the inter-month interest rate meeting was no surprise. The Fed eased and raised interest rates by 25bp. However, the good news has been "priced in". At this time, the market momentum is still there. Retail investors who wait for the news to be announced before starting to sprint are basically leeks. We have also seen the subsequent routines, as always, pull-smash-pull-smash (2/2 pulls up to test 24k, to 2/10 to drop back to 21k to test support, 2/16 breaks through the previous resistance level of 24k and forms a false breakthrough to lure more, 2/16-2/21 top distribution is completed, 2/21-2/28 price returns), this is the rhythm of February, and then returns to the state before the news landed.

Similarly, as Bitcoin started to rise and reached its peak, altcoins began to perform. Various monsters and demons came out one after another, taking the opportunity to fabricate and hype various hot topics.

Interestingly, however, Bitcoin was not absent this time.

First, the release of Damus, the Apple client of the nostr protocol, in early February triggered a wave of attention to the Bitcoin community and the Lightning Network. Although this is just a technical topic, it still makes people marvel at the meme of the npub public key being circulated everywhere. Fortunately, this is just a technical topic, unlike other hot topics, which always fall into the speculation of the currency, and the result is just a zero-sum game, where money flows from A's pocket to B's pocket, and the technology that should be paid attention to is lost. Once the hot topic is over, the speculators disperse, and the whole place is in a mess.

Then, there are the NFT, Ordinals and Inscription technologies on the Bitcoin chain throughout February. Interestingly, on January 9, glassnode was still lamenting that Bitcoin's block capacity demand was still weak and miners received little from the transaction fees (see the figure below).

By February, the 4MB block expanded by segwit (segregated witness) was filled with various NFT small pictures and "messy" non-transaction data. Although Bitcoin NFT ecological tools are extremely scarce and the technical threshold is quite high, it still cannot stop everyone's enthusiasm for going online.

By February 9, the number of Ordinals minted reached more than 20,000 per day, setting a small peak. By the end of February, the total number of Ordinals had exceeded 200,000.

Unlike NFTs on Ethereum, which require small images to be stored off-chain (there is currently no reliable solution to ensure that they will never be lost), small images in Bitcoin NFTs are stored on the Bitcoin chain and exist forever with Bitcoin.

At this point, I can't help but recall the article in early 2021, "NFT is the next Bitcoin-level opportunity" [link] (Liu Jiaolian, 2021.3.16). At that time, NFT was still in the narrative of art, and the industry was still arguing about the future of NFT. Bitcoin taproot (with which Ordinals and inscriptions can be created) would not be launched until nearly 10 months later. No one thought that Bitcoin, an "antique" positioned as electronic gold, would have anything to do with NFT, such a fashionable crypto art...

The development of history is often so wonderful. At first, seemingly unrelated trajectories will unexpectedly have some unexpected integration in the chaotic evolution of complex systems. And the most refreshing innovations often come from these unexpected coincidences.

The Ethereum ecosystem was also busy in February. In the DeFi track, Uniswap’s lawsuit, the controversy over voting governance, the popularity of the perpetual protocol GMX on Arbitrum, the L2 showdown between Arbitrum and Optimism, and the L2 showdown between SHIB and Coinbase. Of course, the biggest hit was the NFT track: Blur vs. Opensea. Hot topics continued, and the market operation was dazzling. These industry dynamics were reported in a timely manner in the "Teaching Chain Insider" every night on the Knowledge Planet, so I will not elaborate on them.

In terms of regulation, the SEC has taken action one after another, cracking down on Kraken's pledge service and suing BUSD. The crackdown by US regulation has given some traders an opportunity. Crisis, the "crisis" of others, is their own "opportunity". Therefore, the Eastern concept came into being. Therefore, some projects that are not known whether they are compliant or not are crowned with the XX concept and enter the recommendation list of big V and small V of self-media (think about why they are included in the list of various self-media? Hehe). Therefore, taking advantage of the Oriental people's worship of foreign things, Winklevoss, the co-founder of Gemini, publicly called for orders, and the slogan was exciting - "The next crypto bull market will rise from the East."

In this turbulent market, nothing is impossible, only what you can't imagine.

All challenges to our cognitive limits are like the shock that NFT pictures bring to our hearts: you can never imagine how rich the rich can be. They spend millions of dollars to buy a small picture when they go out on private jets, which is actually similar to you spending a few dollars to buy a pack of instant noodles to collect a raccoon collection card - it's just a little watering for fun.

The wealth of this world is so unevenly distributed among people and their networks that Oscar Wilde, the master of toxic chicken soup, once said this famous quote:

"When I was young, I thought money was the most important thing in the world. It wasn't until I got older that I realized it was really the case."

So, keep your private keys safe and don’t let anyone take your money. After all, even the SEC chairman has explained it himself:

Not your keys, not your coins.