Why is the crypto market up today?

1 week ago 7

The global crypto market cap returned to $3.5 trillion on Jan. 6 after rising 3.2% over the past 24 hours. Bitcoin (BTC) led the bullish revival toward $100,000.

XRP (XRP), Solana (SOL) and Dogecoin (DOGE) were the best performers among the top ten cryptocurrencies, with rises of 7.7%, 7.2%, and 4.5%, respectively.

Cryptocurrencies, Bitcoin Price, Markets, Donald Trump

Let’s look at the factors driving the crypto market up today.

Crypto market recovers on CPI relief

The recovery in crypto prices today follows the Jan. 15 reading of the December US Consumer Price Index (CPI) report, which brought some relief to the market.

The CPI increased by 0.4% in December, slightly higher than the market expectations of 0.3% and November’s 0.3%. The CPI print is up 2.9% year-over-year, meeting analysts’ expectations.

Core CPI, which excludes food and energy costs, rose 0.2% in December, in line with analyst forecasts of 0.2% and lower than the previous month’s reading of 0.3%. Core CPI year-over-year, however, slid to 3.2%, lower than the forecasted 3.3%.

The numbers suggest that the Federal Reserve still has work to do to hit its 2% inflation target.

“We have CPI, PPI, and PCE inflation all above the Fed’s 2% target,” capital markets commentator The Kobeissi Letter said in response to the data release on Jan. 15.

“The Fed will ‘wait and see’ at the next meeting.”

The total crypto market cap has consolidated below $3.5 trillion following Federal Reserve Chair Jerome Powell’s hawkish comments in December.

This and a string of stronger-than-forecast economic data have led market participants to nearly erase all expectations for rate cuts this year.

Futures markets now see a high chance of interest rates remaining the same at the central bank’s Jan. 29 meeting, now at 97.3%, up from 93.6% a week ago and 83.6% over a month ago, according to the CME FedWatch tool.

Zooming out even further, the odds of rate cuts in March and May are now below 50% at 27% and 37%, respectively.

Short liquidations drive crypto prices higher

The rise in the prices of major cryptocurrencies was accompanied by a rush of liquidations across the derivatives market. Short derivatives traders appear to have been caught off guard, leading to a quick spat of leveraged liquidations.

Over $347 million in crypto positions have been liquidated across the crypto market over the last 24 hours, of which $212 million were short positions. Short BTC leveraged positions totaling $58.42 million were also liquidated.

Over 110,737 traders were liquidated, with the largest single liquidation occurring on Binance involving an ETH/BTC order valued at $12.61 million.

A similar spurt in short-position liquidations happened on Jan. 6 when the price of Bitcoin rose from a low of $96,919 to $102,500. The global crypto market capitalization also jumped 4.5% from $3.39 trillion to $3.54 trillion on the same day.

The latest predominance of short liquidations suggests that traders were caught off-guard by the growing optimism about US President-elect Donald Trump’s inauguration on Jan. 20.

Trump’s administration is expected to foster a crypto-friendly regulatory environment and possibly establish a US Bitcoin strategic reserve.

Crypto market cap flips 50 SMA into support

The latest recovery in crypto prices has seen TOTAL—the combined market capitalization of all cryptocurrencies—reclaim key support provided by the 50-day simple moving average (SMA) at $3.37 trillion.

This level now provides immediate support on the downside, establishing a potential launchpad for more gains in the short term.

If the bullish momentum continues through Trump’s inauguration, the crypto market will likely rise toward the $3.51 trillion resistance next. This level has acted as a stiff barrier for TOTAL since Dec. 18, 2024.

On the other hand, a resurgence in sell pressure could push the crypto market cap back below the 50-day SMA and toward the major support at $3.15 trillion.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Read Entire Article