A quick recovery from what some market watchers feared may be the beginning of the next leg down and a recurrence of the year’s lows has seen the crypto market add $50 billion. But what is driving this significant price increase in the entire crypto complex?
It is clear that a lot of forces have converged.
First, there are the deleveraging events, which seem to have peaked and may have reached the end of their chain of events. As of now, no other shoes have fallen after Terra, Voyager, Celsius, and Three Arrows Capital. Top cryptocurrency prices flashed oversold, and whales are building up.
Second, it’s possible that sellers have run out of steam since large coins like bitcoin are oversold. To that, we can also add a third, related factor: whales are eager to buy fresh holdings because they think the price of cryptocurrencies has reached or is about to reach a bottom.
Following the Luna collapse (more on Luna below), 1k bitcoin whales have been distributing to exchanges; the chart below from Glassnode illustrates how whale distribution correlates with local tops.
Fourth, we must consider the state of other asset classes and the macroeconomic climate, which may have been the impetus for today’s spectacular upturn.
Even if Fed Chairman Jay Powell did not make a statement indicating that he would limit the rate of interest rate increases, there were other signs that the stock market gloom was exaggerated.
For instance, statistics on producer price inflation in China exceeded expectations, raising expectations for additional assistance.
Gas prices in Europe decreased in anticipation of today’s European authorities offering a palliative. Bond prices decreased as a result, even if the price of gold and oil had increased. However, the broad optimism in the stock market has spread to other risky investments, and cryptocurrency is the ultimate risky investment. Risk asset bulls emerged as a result of the weaker dollar. But the dollar’s decline may have been the most important catalyst for today’s optimistic developments, as negative correlation between bitcoin and the dollar is extremely strong.
The opinions and activities of financial institutions should be added as a fifth consideration. Overnight, word spread that Franklin Templeton would be offering cryptocurrency accounts to its institutional clientele. The largest bank in Singapore, DBS, said earlier this week that it would offer digital asset services and trading to its wealthiest 300,000 clients. Few days later, Whompoa Group adopted the same strategy. And all of this comes after the shocking disclosure that BlackRock, the biggest asset management in the world, was investing in cryptocurrency on behalf of its clients.
Why the Ethereum Merge will revolutionize the cryptocurrency industry
The Ethereum Merge is the last and sixth positive to mention.
The best commercial network in the cryptocurrency asset class might be said to be Ethereum. In fact, it is about to embark on a path that will lead to an endpoint where business transactions and the operation of industrial scale systems will be really scalable and cost-effective. In addition, the Ethereum Merge may spur a surge in institutional interest in staking, which would support our fifth rationale, which is institutional interest.
The aforementioned factors may have influenced the thinking of individuals like millionaire Sam Bankman-Fried, the creator of the massively popular FTX cryptocurrency exchange.
The worst is likely gone, he said today to CNBC. “I believe the true suffering began three to four months ago. There won’t likely be any more suffering after this. Things in the area have significantly stabilized “Bankman-Fried says. In case you missed it, here are some cryptocurrency prices that are trending.
Every significant coin is now higher. 9% higher at just over $21k, bitcoin has experienced a significant increase from the week’s low of $18,660.
Ethereum, which was anticipated to maintain its strong performance in the wake of the Merge update, faltered, but it has now also found its groove. The price of the top smart contract platform has increased 5% to $1,724.
Along with the top coins, unexpected advancements have also been made in other areas.
What’s happening with LUNA pumps and will it last?
The ascent of Terra Classic, which has increased 64% this week alone and approximately 400% over the past 30 days, has been applauded by cryptocurrency traders. Today, the trend has partly reversed itself as LUNC is down 12% to $0.000445. Surprisingly, the torch is now being carried by Terra 2.0 (LUNA), the redesigned version of the defunct Terra Luna, which some mock as Do Kwon’s con.
Terra surged ahead by more than 200% in a move that astounded both seasoned and inexperienced market watchers. There are accusations of manipulation in the air, as there always are with such abrupt price changes.
Twitter crypto influencer Fat Man believes a dump is imminent, so prospective purchasers could be caught off guard.
Additionally, there has been a lot of bullish activity in the BTC perpetual futures market, as Kaiko analyst Riyad Carey astutely pointed out.
Price action in cryptocurrencies gives reasons to be happy
All things considered, the crypto industry is currently full of reasons to be happy; this is something that may not have been said at the beginning of the week. However, as cryptocurrency is prone to volatility, investors may prefer to build up their holdings gradually rather than drop a huge lump payment. In other words, although the market may be approaching its bottom, it may not yet be there.
Fishing around or below current market levels, however, could be successful if you plan to hold for months as opposed to days. Your best friend is dollar cost averaging.
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