The crypto market is up today as institutional inflows, total open interest, and Bitcoin market cap all target new highs.
The cryptocurrency market’s capitalization has recovered sharply today, wiping out a good portion of the losses previously incurred.
On March 21, the crypto market valuation rebounded to $2.498 trillion after falling to a two-week low of $2.208 trillion a day before — a circa 13% jump.
Leading the gains were top cryptocurrencies, Bitcoin
BTC $66,916 and Ether ETH
$3,545, which rose approximately 12.5% and 16.5% in the same period.
Lets discuss the core reasons behind the crypto market’s recovery rally today.
Fed raises rate cut expectations
Optimism in the crypto market returned primarily in the wake of the Federal Open Market Committee (FOMC) meeting on March 20.
Federal Reserve officials maintained their projection for three interest rate cuts in 2024, showing a cautious approach toward reducing their bond portfolio. In turn, their outlook indicated that they are not overly concerned about recent increases in inflation.
Jerome Powell, the Fed chairman, emphasized the need for further proof of declining inflation rates, but he also mentioned that it might be suitable to begin softening monetary policies later this year. CME FedWatch Tool now sees a 68.3% possibility of a rate cut in June.
Bitcoin, Ether, and other cryptocurrencies started gaining shortly after picking the Fed’s dovish signals, hinting at a resurgence of risk appetite among investors after recent market declines.
Following the Fed’s comments, this trend was further underscored by a 0.94% drop in the U.S. dollar index (DXY), highlighting a shift in investor sentiment.
Sticky Bitcoin halving euphoria
The crypto market’s recovery occurred in response to a persistent Bitcoin Halving euphoria.
The market remained optimistic about Bitcoin’s upside prospects before and after its scheduled halving event in April. This optimism persists despite the cryptocurrency’s 17.5% correction and a recent slowdown in inflows to its spot exchange-traded fund (ETF).
For instance, Dovey Wan, the founder of investment firm Primitive Ventures, treats the ongoing Bitcoin price decline as the second stage of a “three leg” phase around halvings, wherein BTC undergoes 30-30% corrections but follows the moves up with strong bullish rebounds.
Additionally, Standard Chartered forecasts that Bitcoin’s price could ascend to $150,000 by the end of 2024, driven partly by increasing institutional investments in spot ETFs.
Crypto market rise accompanies $310M in liquidation
The surge in the cryptocurrency market has triggered a significant number of short position liquidations, hitting almost $180 million in just 24 hours. Bitcoin’s short positions led this liquidation spree, totaling $65.50 million; Ether’s followed with $47.38 million in liquidations.
Despite short-sellers’ challenges, the crypto market’s open interest is rising, as noted by the crypto trading analysis platform Coinalyze.
Open interest, which tallies the total value of outstanding futures contracts across exchanges, is a barometer for market activity and investor mood. A surge in open interest typically suggests heightened market engagement and positive investor sentiment.
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