Crypto market breaks above $1 trillion for the first time since FTX's collapse, with bitcoin set for its best month since October 2021

• Total cryptocurrency market capitalization breaks above $1 trillion for the first time since FTX's collapse. 

• Bitcoin is up almost 40% in January, and is set for the best month since October 2021. 
• The rally reflects a pickup in sentiment across risk assets as cooling inflation fuels hopes that an end in sight to the Fed's interest-rate hikes.

The cryptocurrency market is now valued more than $1 trillion for the first time since the collapse of FTX in November, signaling a strong rebound in investor confidence even as the industry faces headwinds. 

Bitcoin, the world's largest cryptocurrency, hit a five-month high above $23,000 over the weekend and is up almost 40% in January, on course for the best month since October 2021. The total market capitalization of virtual currencies has climbed by almost $250 billion so far in January.

It reflects a U-turn in sentiment after a dismal 2022 — a year dubbed 'the crypto winter' — that saw market cap crash by more than $1.4 trillion, and bitcoin lose 64% of its value as the industry suffered a string of high-profile bankruptcies including FTX and Three Arrows Capital.

The gains come even as shockwaves from the FTX collapse continue to be felt across the digital asset industry. As recently as last week, crypto lender Genesis Global filed for bankruptcy protection.

Crypto market capitalization had slid to a low of about $745 billion in late November, in the aftermath of the FTX implosion. A year earlier, the measure briefly topped $3 trillion at the height of the digital-asset frenzy in late 2021.

The latest crypto rally reflects a pickup in investor optimism across riskier assets including stocks, as cooling US inflation stokes hopes an end is in sight to the Federal Reserve's most aggressive cycle of interest-rate increases since the 1980s. News that FTX has recovered more than $5 billion in assets to repay creditors also lent some support.

The annual rate of consumer-price increases in the world's largest economy slowed to 6.5% in December, the latest data show, from a 40-year high reached last June. The Fed reduced the size of its rate hike to 50 basis points last month, after four consecutive increases of 75 basis points each.

An end interest-rate increases would bode well for risk assets, as that means funding costs for investors and businesses would stop rising.