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Why is the crypto market up today?

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Bitcoin (Bitcoin) volatility is finally giving the BTC bulls what they want — but why now?

After months of declines and spending recent weeks in a small trading range, BTC/USD has posted a gain of over 7% in 24 hours.

The largest cryptocurrency, reaching its highest level since mid-September, is rewarding those who refuse to sell and punishing those who short. about $1 billion.

The trend change happened quickly and as the liquidation tally shows, it took many by surprise.

But behind the scenes, little has changed — the macroeconomic situation is much less volatile than it was a week ago, Bitcoin’s internal problems, minor stocks, etc.remains the same.

What could have caused BTC’s price action to finally break out of its year-long downtrend?

Cointelegraph examines three major factors that influence crypto market strength in the current environment.

Federal Reserve could turn the tide with rate hikes

When Cointelegraph reported The US Federal Reserve topped the list as to why the cryptocurrency market posted new losses last week.

Concerns focused on an unwavering policy to keep the US dollar strong and interest rates soaring for the foreseeable future, a worst-case scenario for risk assets.

Nonetheless, last week the consequences of that policy spilled over to other economies, notably Japan, which repeatedly intervened in the foreign exchange market to support the weakening of the yen.

At the same time, rumors are gathering about the prospect of rate hikes as the Federal Reserve (Fed) has run out of room to act. After next month’s rate hike, there are suspicions that policy will begin to make a U-turn, with smaller rate hikes in the months that follow before a full reversal in 2023.

Here are some important upcoming dates for the Fed:

  • Oct 28: Personal Consumption Expenditure (PCE) Price Index
  • November 1-2: Federal Open Market Committee (FOMC) meeting, rate hike decision

So the signal that the Fed is preparing to soften its hawkish stance is being picked up by a market weary from a year of quantitative tightening (QT).

November FOMC still overwhelming majority Be expected According to CME Group’s FedWatch tool, there will be a 0.75% rate hike in conjunction with September and July.

Federal Reserve Target Interest Rate Probability Chart. Source: CME Group

Bitcoin Volatility Hits Record Low

Analysis of data from Cointelegraph Market Pro When TradingViewreveals that BTC/USD has been quiet for far too long.

This is especially noticeable in the Bollinger Bands volatility indicator. request a breakout several weeks.

BTC/USD 1-day candle chart (Bitstamp) using Bollinger Bands.Source: Trading View

Bitcoin’s volatility has fallen below that of some major fiat currencies this month, making BTC look more like a stablecoin than a risky asset.

However, analysts have long expected the trend to undergo a drastic change. And yes, the cryptocurrency market did not disappoint.

A look at Bitcoin’s Historical Volatility Index (BVOL) recently hit multi-year lows, suggesting that Bitcoin still has a way to give up this property.

“What is very interesting is that the volatility is so compressed that as a market participant we are so conditioned that even a 3% move feels like a 15-20% move.” commented.

A weekly candlestick chart of the Bitcoin Historical Volatility Index (BVOL).Source: Trading View

Dollar looks to a new chapter

rear Parabolic uptrend through 2022the USD is just beginning to show bearish signs.

Related: Analysts set Bitcoin price at $30,000 next month, breakout slated

The US Dollar Index (DXY) recently highest level since 2002and momentum is still returning and could rise further at the expense of both risk assets and major currencies.

In the meantime, however, DXY has been under pressure and its decline has been in line with the return to form of Bitcoin and Altcoins.

This points to a problem that Bitcoin bulls hope to shake up: its continued strong correlation with traditional markets and its inverse correlation with the dollar.

“Bitcoin’s correlation with gold is now rising from 0 in mid-August to around 0.50,” said trading firm Barchart. clearly this week.

“Correlation is higher between $SPX (0.69) and $QQQ (0.72), but the correlation has declined recently.”

Charles Edwards, founder and analyst of crypto asset manager Caprior, said: I got it Bitcoin macro price troughs are often accompanied by an increase in gold correlation.

BTC/XAU correlation chart. Source: Barchart/Twitter

Scott Melker, an analyst and podcast host known as “The Wolf of All Streets,” also said: Confirmed Changes in the relationship between Bitcoin and Nasdaq.

“Nasdaq futures have fallen. Bitcoin has risen. The short-term correlation between the two has disappeared in the last few weeks.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. All investment and trading movements involve risk. You should do your own research when making a decision.