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Cryptocurrency market cap is back above $1 trillion after biggest rise in 9 months 21,000, Ethereum above $1,500, while altcoins soared Despite the strong bounce, the market is still down nearly 65%, having hit nearly $3 trillion in November 2021 Bear market down 77% for Bitcoin, but traders are cautious this could just be a short term relief rally For a few hours over the weekend if you looked at a cryptocurrency chart it felt like it was 2020 all over again. COVID may be fading in the rearview mirror, but so are cryptocurrency prices. I dove deep into some on-chain data last week that showed just how torrid 2022 has been for investors, with 73% fewer bitcoin millionaires, a $2 trillion drop in the overall crypto market, and a reputation dragged through the mud by multiple scandals. . Looking at this week’s data, it’s a little more bullish for cryptocurrency investors.
Half a billion dollars worth of short sellers are liquidated
The weekend brought some rest, however. Bitcoin surged to its strongest rally in 9 months, taking the market by surprise and topping $21,000. Looking at Coinglass data, there were over half a billion dollars worth of short sellers liquidated last weekend. The chart below shows the extent of these selloffs, more or less matching the long selloffs when the FTX collapsed in early November.
Crypto Market Recovers $1 Trillion Mark
The jump in digital assets followed softer-than-expected inflation data. This optimism that inflation may have peaked has led investors to bet that the Federal Reserve may change its high-interest policy sooner than anticipated. As we already know, high interest rates sucked liquidity out of the market, hurting risky assets in general. Cryptocurrency is being traded as one of these high-risk assets, and therefore prices crashed when the Federal Reserve implemented this tight monetary policy – and so cryptocurrency exchanges have not been kind to long-term traders. 2023 has brought hope that if inflation has indeed peaked, a light at the end of the tunnel may be visible. As a result, the cryptocurrency market skyrocketed to regain a market cap of $1 trillion. It’s still a long way off the all-time high of nearly $3 trillion, but Bitcoin at $21,000 and Ether at $1,500 mark the highest prices for the pair since before the FTX scandal.
Has the cryptocurrency market bottomed?
The glaring question facing investors now is whether this is just a short-term relief rally or whether the bottom is coming. As with most market issues, the macro is key. “The last few months have undoubtedly brought indicators of a more positive environment towards inflation, as well as momentum for the reopening of the Chinese economy,” said Max Coupland, director of CoinJournal. “However, I worry that investors are being too quick to assume this means the Fed will now change sooner than expected. Jerome Powell (Fed Chairman) has been adamant that rates will not come down until inflation is firmly under control, and we are still a long way from the 2% target, while uncertainties such as the Russian war in Ukraine are still highly unpredictable.” Let’s play the (very) hypothetical game of assuming the bottom is there. That would put the 13-month bear market down 77% from peak to trough for Bitcoin. Historically, this would be the third biggest handicap in history. However, this would only be in percentage terms. The cryptocurrency market today is very different from previous years, and the size of capital loss is at a different level – at over $2 trillion, to be precise. So while the duration and size of the bear market might suggest that we are in the last stages, past data simply cannot be extrapolated reliably when it comes to cryptocurrencies. Bitcoin has only come to prominence as a mainstream asset in recent years, and earlier periods featured low liquidity and a niche investor base. Today, we are also facing an unprecedented macro climate – runaway inflation, high interest rates for the first time in Bitcoin’s history, and a bear market in the wider economy for the first time since the crash of 2008 – the same year that Bitcoin was invented. In closing, this past weekend was a welcome relief for cryptocurrency investors and represents the most powerful surge in nine months, before the collapse of LUNA, Celsius, FTX and the transition to high interest rates in the council economy. . But the road ahead remains difficult for the market as a whole, with inflation still high, an ongoing war in Europe and a myriad of other macro variables fluctuating. This week was good news, but cryptocurrency investors still need to be cautious. The next mark on the calendar? The important FOMC meeting on Feb. 1, when the Federal Reserve will decide on the latest rate policy. If you use our data, we would appreciate a link to https://guiadobitcoin.com.br/ Crediting our work with a link helps us continue to provide you with data analysis research. Research Methodology Settlement data via Coinglass. Price data from Yahoo Finance. All other data via CoinJournal
