The market for cryptocurrencies is rising today as new highs are being reached by institutional inflows, total open interest, and Bitcoin market capitalization.
Today, the capitalization of the cryptocurrency market has significantly recovered, wiping out a significant amount of the losses that were previously sustained.
The value of the cryptocurrency market increased by about 13% on March 21 to $2.498 trillion, from a two-week low of $2.208 trillion the day before. Top cryptocurrencies Ether and Bitcoin led the increases, rising 16.5% and 12.5%, respectively, over the same time frame.
Let’s talk about the main causes of today’s comeback rise in the cryptocurrency market.
Fed Increases Forecasts for Rate Cuts
Following the Federal Open Market Committee (FOMC) meeting on March 20, the cryptocurrency market saw a resurgence of optimism.
Officials from the Federal Reserve kept their forecast of three rate reductions in 2024, demonstrating a cautious approach to cutting their bond holdings. Conversely, their attitude suggested that they are not too alarmed by the recent spikes in inflation.
The chairman of the Federal Reserve, Jerome Powell, stressed the need for additional evidence of falling rates of inflation, but he also hinted that it would be appropriate to start loosening monetary policy later this year. The probability of a rate cut in June is now 68.3%, according to CME FedWatch Tool.
Following the Fed’s dovish signals, Bitcoin, Ether, and other cryptocurrencies began to rise, suggesting that investors may be returning to risk-taking following recent market dips.
A 0.94% decline in the U.S. dollar index (DXY) after the Fed’s remarks further highlighted this trend and indicated a change in investor attitude.
Expensive Halving of Bitcoin Euphoria
The crypto market bounced back as a result of the ongoing excitement surrounding the Bitcoin halving.
Before and after the planned halving event of Bitcoin in April, the market continued to be bullish about the cryptocurrency’s positive potential. Despite the 17.5% decline in the cryptocurrency and the recent lull in inflows into its spot exchange-traded fund (ETF), this confidence endures.
For example, Dovey Wan, the founder of Primitive Ventures, views the current decrease in the price of Bitcoin as the second leg in a “three leg” period surrounding halvings, in which BTC has corrections of between 30 and 30 percent but then experiences significant bullish rallies afterward.
Furthermore, Standard Chartered predicts that growing institutional investments in spot ETFs would contribute to Bitcoin’s potential price increase to $150,000 by the end of 2024.
A $310M liquidation follows the surge in the cryptocurrency market.
Since the market for cryptocurrencies has risen so sharply—nearly $180 million has been liquidated in a single day—many short positions have been triggered. With $65.50 million in short positions, Bitcoin led this liquidation frenzy; Ether came in second with $47.38 million.
The cryptocurrency trading intelligence tool Coinalyze has observed that the open interest in the market is increasing despite the difficulties faced by short sellers.
The aggregate value of all outstanding futures contracts across exchanges, or open interest, serves as a gauge for investor sentiment and market activity. Increased market participation and optimistic investor attitude are usually indicated by a spike in open interest.
