Why is the crypto market soaring today?

Why is the crypto market soaring today?

The crypto market rose today and Bitcoin (BTC) price rose 3.1% to $17,171 on Nov. 15, as confidence briefly returned to the global macro outlook, with pressure from a lower-than-expected producer price index (PPI) and a cooling US dollar.

Crypto and stock markets responded PPI data This showed wholesale prices rose 0.2% for the month and 8% from a year ago. This is less than the monthly forecast of 0.4% and an annual increase of 8.4% in the previous month. The news boosted the Nasdaq 2.5% and the S&P 500 1.4%.

FTX’s latest bankruptcy It triggered an incredible amount of volatility, but Bitcoin price reacted positively and traders rallied above $17,000. final surrender alert yet to eat. Let’s examine the three main factors affecting the strength of the crypto market in the current environment.

Nasdaq, S&P 500 and Bitcoin. Source: TradingView

volatility is still possible. ongoing FTX statusSome Analysts believe that the bottom is still not reached for the crypto market and BTC losses on-chain Lowest SOPR since March 2020.

The picture for the remainder of Q4 remains unclear as some analysts still expect 2022 to replicate the 2018 bear market. At the same time, there is hope that this downward trend will continue. gone for good At the beginning of 2023.

Federal Reserve made some headway in inflation

high inflation It has been a year-long problem, and back-to-back negative CPI reports have given the Fed plenty of reasons to keep raising rates. After CPI data rise Bitcoin soared to $1,000 in minutes A positive PPI on November 10 indicates to the market that inflation may have peaked.

As inflation appears to be stabilizing, rumors are gathering about the outlook for rate hikes. After positive PPI figures and a 75 basis point increase in November, there are doubts that policy will start a U-turn and make smaller increases in subsequent months before fully reversing in 2023.

December’s Federal Open Market Committee (FOMC) is currently expected According to CME Group’s FedWatch Tool, it will increase 25 to 50 basis points instead of the usual 75 basis points.

Fed target rate contingency chart. Source: CME Group

Unemployment data released on November 4 increased the confidence of the bulls. A higher-than-expected return could mean rate increases are having the desired effect, and that difficult Fed pivot may come sooner or later.

Bitcoin open interest plummets after FTX-induced volatility spike

The data shows that BTC/USD volatility is at: Annual lows under $16,000 but the FTX bank run translated the spike that investors had been waiting for.

Bitcoin open interest has also seen a sharp decline after the volatile week following the collapse of FTX. On November 5, BTC’s open interest was $32.8 billion, and on November 14 it dropped significantly to $18.5 billion.

Bitcoin price and open interest. Source: Coin glass

In October, Even Bitcoin volatility has fallen below that of some major fiat currencies make BTC look more like a stablecoin than a risk asset.

A look at the Bitcoin historical volatility index (BVOL), which has been at perennial lows only seen a few times recently, has since spiked sharply above 25.05.

Bitcoin volatility index. Source: TradingView

William Clemente, co-founder of crypto research firm Reflexivity Research, stated that Bitcoin funding rates are finally negative. believes signals to reverse.

Bitcoin funding rates. Source: Glassnode

Related: FTX crash, followed by a surge in stablecoin inflows and DEX activity

Dollar opens a new page

then a Parabolic uptrend through 2022The US dollar index is now starting to show signs of cooling.

The US dollar index (DXY) recently Highest levels since 2002and momentum may have cooled after recent CPI and PPI pressure showed the Fed making some headway with runaway inflation. In a perfect world, investors would ideally see a retracing DXY as a reason to increase sentiment towards risky assets like cryptocurrencies.

Meanwhile, DXY is under pressure and its decline has coincided with a return to form for Bitcoin and altcoins. Historically, a cooling DXY is followed by the Bitcoin price moving in the opposite direction.

BTC/DXY 1-day comparison. Source: TradingView

Overall, crypto markets will likely continue to see price gains and most analysts agree that there are plenty of volatile days ahead, but positive macro news of potential peak inflation provides a nice short-term boost in crypto prices.

The views and opinions expressed here are those of the author alone and do not necessarily reflect those of Cointelegraph. Every investment and trading move involves risk and you should do your own research when making a decision.