Bitcoin and ether are on track for a modest win in February, even after a big drop earlier this month.

Bitcoin is expected to post gains of about 1% for the month, according to Coin Metrics. In January, bitcoin posted a 38% increase and its best month since 2021. Meanwhile ether is up about 3% in February, after a 31% gain in January.

Investors were frightened earlier this month after what appeared to be the start of a potential regulatory crackdown on crypto companies in the US — including the Securities and Exchange Commission’s enforcement action against Kraken, the Wells Notice of a future settlement against Paxos, and New York authorities . State Department of Financial Services orders Paxos to stop minting the Binance USD (BUSD) stablecoin.

That led to a short sell-off in crypto assets that saw bitcoin and ether fall about 6% and 8.5%, respectively, in the three-day period ending Feb. 10. While they quickly made up for those losses the following week, they’ve been in a bit of a slump ever since.

“It’s pretty easy to say the lows are behind us because there’s really no disparate further selling, but in terms of what actually takes us higher, that’s more difficult,” said Jeff Dorman, chief investment officer at Arca.

“Most of the negative news is coming from regulators right now, but it just has no long-term effect on the market because everything in crypto has perfect substitutes,” he added, referring to when certain crypto companies have been hit by regulators in the past, traders have can always move their activities to another place.

As regulatory scrutiny mounts in the US, reports emerged this month that Hong Kong plans to legalize retail crypto trading as part of a larger push to become a global crypto hub, with silent support from China. The move has been a positive catalyst for crypto.

In the US, however, investors are keeping an eye on the Fed, says James Lavish, managing partner at the Bitcoin Opportunity Fund.

“Bitcoin has long been the tip of the spear for risk assets,” he said. “It’s what moves first usually when you talk about buying or selling risky assets as part of your portfolio allocation and if we do indeed have a Fed pivot I expect bitcoin will sniff that first. It will have a strong move.”

Dorman believes that macro events are no more gripping bitcoin or the broader crypto market than earlier in 2022, before the collapse of the Terra project in the spring.

He noted that January was a “great” month for most asset classes, including crypto, due to the very negative sentiment investors had at the end of the year. The S&P 500 And Nasdaq composite posted their best January in four years and 22 years, respectively. While February was “a complete turnaround” overall, it didn’t drag crypto along, Dorman said.

“There was definitely a macro overtone in that the market started pricing in peak rates and disinflationary numbers, which has been reversed in February,” he said. “In February, digital assets sold nowhere near as much as what you’ve seen in the interest rate market in the stock market.”