- Cryptocurrency market cap is back above $1 trillion after biggest jump in 9 months
- Half a billion dollars of short sales were liquidated over the weekend, the most in three months
- Bitcoin Is Back Above $21,000, Ethereum Above $1,500 While Altcoins Soar
- Despite the powerful surge, the market is still down close to 65%, with a peak of nearly $3 trillion expected in November 2021
- Bear market plunges 77% for bitcoin, but traders caution it may just be a short-term relief rally
For a few hours over the weekend, if you look at a crypto chart, it felt like it was 2020 all over again.
COVID may have faded in the rear-view mirror, but so have crypto prices. i took a deep dive some on-chain data Last week that showed just how tough 2022 was for investors with 73% fewer bitcoin millionaires, a $2 trillion drop in the overall crypto market, and reputations dragged through the mud by various scandals.
looking at this week’s stats coinsjournal.netThis is a bit too optimistic for crypto investors.
Half a billion dollars of short sellers were liquidated
However, the weekend brought some relief. Bitcoin surged in its strongest rally in 9 months, surprising the market and breaking above $21,000.
Looking at data from CoinGlass, over half a billion dollars worth of short sellers were liquidated this past weekend. The chart below shows the range of these liquidations, roughly matching the long liquidations ftx collapsed In early November.
Crypto market achieves $1 trillion mark
Digital assets surged after lower-than-expected inflation data. Optimism that inflation may have peaked has prompted investors to bet that the Federal Reserve may end its high-interest rate policy sooner than previously expected.
As we know by now, high interest rates have sucked liquidity out of the market, hurting riskier assets across the board. Crypto is trading very much like one of these high-risk assets, and so prices have fallen since the Federal Reserve implemented this tight monetary policy – and so crypto exchange There has been less mercy towards long traders.
2023 has brought hope that if inflation has truly peaked, a light may appear at the end of the tunnel. As a result the crypto market has grown to achieve a $1 trillion dollar market cap. It’s still far from 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 before the FTX scandal.
Has the crypto market bottomed out?
The obvious question before investors now is whether this is just a short-term relief rally, or a bottom.
As with most questions in the market, macro is the key.
“The past few months have undoubtedly brought indicators of a more positive environment with regard to inflation, as well as the reopening of the Chinese economy,” Max Coupland, director of CoinJournal, said.
“However, I worry whether investors are jumping the gun on the assumption that this means the Fed will now pivot sooner than expected. (Fed Chair) Jerome Powell has been adamant that as long as inflation is firmly under control, Rates won’t drop until that happens, and we’re still far from the 2% target, while uncertainties like the Russian war in Ukraine are still highly unpredictable.
Let’s play a (much) imaginary game of make believe below. This would make the bear market 13 months long, with a 77% drop from peak to trough for bitcoin.
Historically, this would establish it as the third largest deficit in history. However, it will be in percentage terms only. The crypto market today is vastly different from years past, and the size of the capital wipeout is at a different level – or over $2 trillion to be precise.
Therefore, while the length and size of the bear market may perhaps indicate that we are in the later stages, when it comes to crypto past data simply cannot be extrapolated reliably. Bitcoin only broke out as a mainstream asset in the last few years, and prior time periods involved low liquidity and a niche group of investors.
Today, we are also facing an unprecedented macroeconomic climate – runaway inflation, high interest rates for the first time in bitcoin history, and a bear market in the broader economy for the first time since the crash of 2008 – the same year bitcoin was invented. .
In wrapping up, the past weekend has been a welcome respite for crypto investors, and amounts to the most powerful surge in nine months, before the collapse of Luna, Celsius, FTX and the transition to higher interest rates across the board economy.
But the road ahead for the market at large remains difficult, with inflation still elevated, a war raging in Europe and a myriad of other macro variables oscillating. This week has been good news, but crypto investors shouldn’t be counting their chickens just yet.
Next mark on the calendar? The all-important FOMC meeting on February 1st, when the Federal Reserve will decide on the latest interest policy.
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Liquidation data via CoinGlass. Price data from Yahoo Finance. All other data via CoinJournal