Cryptocurrency Market Makes Strong Recovery, Led by Bitcoin and Ether
The cryptocurrency market witnessed a significant rebound on March 21, with its total capitalization bouncing back to $2.498 trillion after hitting a two-week low of $2.208 trillion the previous day. The surge in the market was primarily driven by the top cryptocurrencies Bitcoin (BTC) and Ether (ETH), which saw gains of approximately 12.5% and 16.5% respectively during this period.
TLDR
- The cryptocurrency market capitalization jumped around 13% on March 21, recovering from its two-week low.
- Bitcoin and Ether were the key contributors to this recovery, with gains of approximately 12.5% and 16.5% respectively.
- The Federal Reserve’s dovish signals during the FOMC meeting on March 20, along with ongoing Bitcoin Halving optimism and increasing institutional investments in spot ETFs, played a significant role in boosting market sentiment.
- Short position liquidations worth nearly $180 million occurred as a result of the market surge.
The resurgence of the cryptocurrency market can be attributed to several factors, with the Federal Reserve’s dovish signals during the Federal Open Market Committee (FOMC) meeting on March 20 being the primary catalyst. During the meeting, Federal Reserve officials maintained their projection for three interest rate cuts in 2024, indicating their cautious approach to reducing their bond portfolio and signaling that they are not overly concerned about recent increases in inflation.
Fed Chairman Jerome Powell emphasized the need for further evidence of declining inflation rates and suggested that it might be appropriate to start softening monetary policies later this year. Following these comments, investor sentiment shifted, resulting in a 0.94% drop in the U.S. dollar index (DXY), indicating a resurgence of risk appetite among investors after recent market declines.
Another contributing factor to the market recovery is the ongoing Bitcoin Halving euphoria. Despite Bitcoin’s recent correction and a slowdown in inflows to its spot exchange-traded funds (ETFs), the market remains optimistic about Bitcoin’s upside potential before and after its scheduled halving event in April.
Dovey Wan, the founder of investment firm Primitive Ventures, sees the current Bitcoin price decline as part of a “three leg” phase around halvings. According to Wan, BTC experiences 30-50% corrections but follows them up with strong bullish rebounds.
In addition to these factors, Standard Chartered has forecasted that Bitcoin’s price could reach $150,000 by the end of 2024, partly due to increasing institutional investments in spot ETFs.
The surge in the cryptocurrency market also triggered significant short position liquidations totaling almost $180 million within a span of 24 hours. Bitcoin’s short positions accounted for $65.50 million of this liquidation spree, followed by Ether’s $47.38 million.
Despite the challenges faced by short-sellers, the crypto market’s open interest, which measures the total value of outstanding futures contracts across exchanges, is rising. This suggests increased market engagement and positive investor sentiment.
Moreover, besides Bitcoin and Ether, other cryptocurrencies like Dogecoin (DOGE), Litecoin (LTC), and Bitcoin Cash (BCH) also experienced substantial gains. These gains were driven by Coinbase’s plan to offer futures contracts on these assets.
The broad-market CoinDesk 20 Index (CD20) also reflected the overall positive sentiment in the crypto market, rising nearly 3% over the past 24 hours.
Hot Take: Cryptocurrency Market Bounces Back with Bitcoin and Ether Leading the Way
The cryptocurrency market made a strong recovery on March 21, driven by the resurgence of top cryptocurrencies Bitcoin and Ether. The Federal Reserve’s dovish signals during the FOMC meeting, along with ongoing Bitcoin Halving optimism and increasing institutional investments in spot ETFs, played a crucial role in boosting market sentiment. Despite short-sellers’ challenges, the crypto market’s open interest is rising, indicating positive investor sentiment. With the overall positive sentiment in the crypto market, there are high hopes for further growth and potential price surges in the near future.
Sources: Blockonomi
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