Bitcoin and ether are on pace for a modest February win, even after suffering a big drop earlier in the month.

Bitcoin had eked out a 0.2% gain for the month by 4:15 p.m. ET, according to Coin Metrics. In January bitcoin posted a 38% rise and its best month since 2021. Meanwhile, ether had risen higher by 1.7%, following a January gain of 31%. Unlike traditional markets, the crypto market remains open 24 hours a day, even on weekends and public holidays.

Investors were spooked earlier in the month after what appeared to be the beginning of a potential regulatory crackdown on crypto businesses in the U.S. — including the Securities and Exchange Commission’s enforcement action against Kraken, its Wells Notice of a future settlement against Paxos and the New York State Department of Financial Services’ ordering Paxos to stop minting the Binance USD (BUSD) stablecoin.

That led to a brief sell-off in crypto assets that took bitcoin and ether down about 6% and 8.5%, respectively, in the three-day period ended Feb. 10. Although they quickly recovered those losses the following week, they’ve been in a bit of a lull since.

“It’s pretty easy to say that the lows are behind us because there really isn’t any disparate further selling, but in terms of what actually takes us higher – that’s harder,” said Jeff Dorman, chief investment officer at Arca.

“Most of the negative news right now is coming out of regulators, but it’s just not really having any long-term effect on the market because everything in crypto has perfect substitutes,” he added, meaning when certain crypto companies in the past have been hit by regulators, traders have always been able to move their activity somewhere else.

While regulatory scrutiny is ramping in the U.S., reports that Hong Kong is planning to legalize retail crypto trading as part of a bigger push to become a global crypto hub surfaced this month, with a quiet backing from China. The move has been a positive catalyst for crypto.

In the U.S., however, investors are on Fed watch, said James Lavish, managing partner at the Bitcoin Opportunity Fund.

“Bitcoin has been the tip of the spear for risk assets for a long time,” he said. “It’s what moves first typically when you’re talking about either buying or selling risk assets as part of your portfolio allocation and when we do in fact have a Fed pivot I expect that bitcoin is going to sniff that out first. It’s going to have a strong move.”

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Bitcoin and ether in February

Dorman is of the opinion that macro events haven’t had the hold on bitcoin or the broader crypto market that they did earlier in 2022, before the collapse of the Terra project in spring.

He noted that January was a “great” month for most asset classes, including crypto, following the very negative sentiment investors carried at the end of the year. The S&P 500 and Nasdaq Composite posted their best Januaries in four years and 22 years, respectively. Both are on track for to post February declines.

While this month has been “a complete reversal” overall, crypto didn’t get swept up in it, Dorman said.

“There was definitely a macro overtone to that in the sense that the market started pricing in peak terminal rates and disinflationary numbers, which has been reversed in February,” he said. “In February, digital assets haven’t sold off nearly as much as what you’ve seen from the equity market in the rates market.”