Cryptocurrency Market Revives: Federal Reserve's Influence and Bitcoin Halving Ignite Recovery
Summary:
The cryptocurrency market has seen a significant recovery, with a jump from a two-week low of $2.208 trillion to $2.498 trillion. The resurgence is largely attributed to both the Federal Open Market Committee's (FOMC) meeting, which indicated not overly concerned about recent increases in inflation and the bullish outlook surrounding Bitcoin. Although the market's recovery has led to significant short position liquidations, there's an overall positive shift in investor sentiment.
Today, the valuation of the cryptocurrency market has taken a sharp turn for the better, effectively reversing a significant chunk of previously suffered losses. As of March 21, the market capitalization for cryptocurrencies bounced back to $2.498 trillion from a 2-week low of $2.208 trillion, marking a roughly 13% rise. Daily performance charts for TOTAL crypto market cap versus BTC/USD and ETH/USD show this clearly. Bitcoin (BTC) and Ether (ETH), major players in the crypto sphere, led the way with respective increases of around 12.5% and 16.5% during the same duration. The discussion now focuses on several explanations for this swift recovery rally in the crypto market.
One of the key factors contributing to renewed confidence in the crypto arena follows on the heels of the Federal Open Market Committee (FOMC) meeting held on March 20. Federal Reserve officers upheld their forecast of three cuts to interest rates in the coming year, indicating a careful strategy in terms of downsizing their treasury holdings. This suggests that they are not overly anxious about mounting inflation.
Federal Reserve Chair, Jerome Powell, emphasized on the requirement for additional evidence supporting declining inflation rates. However, Powell also suggested the possibility of initiating a relaxation of monetary measures later in the year. Currently, the CME FedWatch Tool projects a 68.3% chance of a rate cut in June.
Bitcoin, Ether, and other analogous cryptocurrencies began showing signs of upward movement soon after detecting mild signals from the Fed, indicating a potential revitalization of investors’ risk appetite following recent market slumps. A decrease of 0.94% in the U.S. dollar index (DXY), following the Fed’s remarks, further underscores this shifting investor mood.
Crypto resurgence seems also fueled by the lingering excitement surrounding Bitcoin halving. Anticipation for the potential success of Bitcoin maintained strong momentum before and even after the scheduled halving event in April. This hopeful outlook remains, even with Bitcoin's 17.5% correction and recently stunted inflows into its spot exchange-traded fund (ETF).
Standout predictions, like Standard Chartered's estimation that Bitcoin prices will increase to $150,000 by the end of 2024 prompted by spikes in institutional commitments in spot ETFs, also contribute to the market's recovery.
The crypto market surge has resulted in numerous short position liquidations, causing nearly $180 million to be wiped out in a mere 24 hours. Leading the liquidation charge were Bitcoin's short positions at $65.50 million, followed closely by Ether's liquidations at $47.38 million.
However, despite challenges for short-sellers, the total value of open futures contracts across exchanges, as viewed through the lens of the crypto trading analysis platform Coinalyze, is seeing an uptick. This increase typically indicates increased market involvement and a positive shift in investor sentiment.
Please remember this article does not offer investment advice or recommendations. All investment or trading decisions carry a certain degree of risk and individuals should conduct thorough personal research before making them.
Published At
3/21/2024 1:09:19 PM
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