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Key Takeaways

• The cryptocurrency market cap is again above $1 trillion following the biggest surge in 9 months 
• Half a billion dollars of short gross sales had been liquidated over the weekend, essentially the most in three months
• Bitcoin is again above $21,000, Ethereum above $1,500, whereas altcoins have soared
• Despite highly effective bounce, the market remains to be down near 65%, having peaked at practically $3 trillion in November 2021
• Bear market drawdown at 77% for Bitcoin, however merchants are cautious this may increasingly solely be a short-term aid rally

For a few hours over the weekend, in the event you checked out a crypto chart, it felt prefer it was 2020 once more.

COVID could also be fading into the rear-view mirror, however so had crypto costs. I produced a deep dive into (*9*) final week which confirmed how torrid 2022 had been for traders, with 73% much less bitcoin millionaires, a drawdown of $2 trillion in the general crypto market, and a fame dragged by the mud by numerous scandals. 

Looking at knowledge this week for coinjournal.net, it’s a little extra optimistic for crypto traders. 

Half a billion dollars of short sellers liquidated

The weekend introduced a little respite, nevertheless. Bitcoin surged to its strongest rally in 9 months, taking the market unexpectedly and breaking upwards above $21,000. 

Looking at knowledge from Coinglass, there have been over half a billion dollars of short sellers liquidated this previous weekend. The beneath chart exhibits the extent of these liquidations, roughly matching the lengthy liquidations again when FTX collapsed in early November. 

Crypto market regains $1 trillion mark

The bounce in digital belongings adopted softer-than-expected inflation knowledge. This optimism that inflation might have peaked has brought on traders to guess that the Federal Reserve might pivot off its high-interest fee coverage before beforehand anticipated. 

As we all know by now, high-interest charges have sucked the liquidity from the market, hurting danger belongings throughout the board. Crypto may be very a lot buying and selling like one of these high-risk belongings, and therefore costs have collapsed because the Federal Reserve has applied this tight financial coverage – and therefore crypto exchanges have been lower than type to lengthy merchants. 

2023 has introduced hope that if inflation actually has peaked, a gentle on the finish of the tunnel could also be seen. The crypto market has surged to regain a $1 trillion greenback market cap as a outcome. It remains to be a far cry from the near-$3 trillion all-time excessive, however Bitcoin at $21,000 and Ether at $1,500 marks the best costs for the duo since earlier than the FTX scandal. 

Has the crypto market bottomed?

The obtrusive query going through traders now’s whether or not that is merely a short-term aid rally, or whether or not the underside is in. 

As with most questions in the market, macro holds the important thing. 

“The last couple of months have undoubtedly brought indicators of a more positive environment with regards to inflation, as well as the boost of the Chinese economy reopening,”  stated Max Coupland, Director at CoinJournal. 

“However, I do worry whether investors are jumping the gun by presuming that this means the Fed will now pivot sooner than expected. (Fed chair) Jerome Powell has been adamant that rates will not taper until inflation is firmly under control, and we are still a long way from the 2% target, while uncertainties such as the Russian war in Ukraine still loom as highly unpredictable”. 

Let’s play the (very) hypothetical sport of assuming the underside is in. That would put the bear market at 13 months lengthy, with a 77% drawdown from peak-to-trough for Bitcoin. 

Historically, this may place it because the third biggest disadvantage in historical past. However, that might solely be in proportion phrases. The crypto market at this time is vastly totally different to years previous, and the scale of the capital wipeout is on a totally different degree – or over $2 trillion, to be exact. 

So, whereas the size and dimension of the bear market may maybe indicate we’re in the latter levels, previous knowledge merely can’t be reliably extrapolated in terms of crypto. Bitcoin solely broke by as a mainstream asset in the previous couple of years, and prior time intervals featured low liquidity and a area of interest set of traders. 

Today, we’re additionally going through an unprecedented macro local weather – rampant inflation, excessive rates of interest for the primary time in Bitcoin’s historical past, and a bear market in the broader financial system for the primary time because the 2008 crash – the identical 12 months Bitcoin was invented. 

In wrapping up, the previous weekend has been a welcome reprieve for crypto traders, and quantities to essentially the most highly effective surge in 9 months, again earlier than the collapses of LUNA, Celsius, FTX and the transition to excessive rates of interest in the board financial system. 

But the highway forward stays powerful for the market at giant, with inflation nonetheless lofty, a warfare ongoing in Europe and myriad different macro variables oscillating. This week has been excellent news, however crypto traders gained’t be counting their chickens fairly but. 

The subsequent mark on the calendar? The all-important FOMC assembly on February 1st, when the Federal Reserve will determine upon the newest curiosity coverage. 

If you utilize our knowledge, then we might respect a hyperlink again to https://coinjournal.net. Crediting our work with a hyperlink helps us to maintain offering you with knowledge evaluation analysis. 

Research Methodology

Liquidation knowledge through Coinglass. Price knowledge from Yahoo Finance. All different knowledge through CoinJournal