Bitcoin price is up 39 per cent since the turn of the year, a first-month gain bettered only twice before when crypto was in its infancy

Bitcoin is headed towards its best January since 2013 on bets that monetary policy tightening and the crypto sector crisis are receding.

The world’s largest token in terms of market cap is 39 per cent higher since the turn of the year, a first-month gain bettered only twice before when crypto was in its infancy. Other cryptos such as Solana, Axie Infinity and Decentraland have seen their value double, part of a $280 billion January jump in digital assets overall, according to CoinGecko figures. Bitcoin dropped 2.9 per cent to $23,111 as of 3:44 pm GMT in New York on Monday as risk assets declined.

The bounce back from last year’s rout is part of a wider revival in risk appetite on hopes that central banks will slow interest rate hikes and perhaps even cut borrowing costs later during the year as inflation cools.

The rally in digital coins has weathered ongoing fallout from events such as the collapse of FTX exchange, the bankruptcy of crypto lender Genesis Global Holdco LLC and a spate of layoffs across the crypto industry.

Still, there are a number of sceptics who doubt if the bounce back in the likes of crypto and tech stocks will last. One risk is that the markets’ hope for soft economic landing turns out to be fanciful because interest rates must stay higher for longer.

The comeback of speculative assets such as Bitcoin and the Ark Innovation ETF ‘will likely reverse’ if oil, wages and consumer-price increases shift the ‘soft landing’ narrative temporarily in coming weeks into a ‘no landing’ view, according to Bank of America (BoA) Corp. strategists led by Michael Hartnett.

Federal Reserve Chair Jerome Powell may also remind investors that the Fed plans to keep rates higher for some time.

Some markets across the globe are also flashing warning signs. For example, hedge funds have built up the biggest bearish bet on bond futures on record, clashing with the narrative that a peak in rate hikes is near.