Crypto Comeback: Examining the Crypto Price Surge

Over the past 3 weeks, the cryptocurrency market has seen a surge, with Bitcoin leading the way and gaining over 30%. The rally can be attributed to several factors, including a massive squeeze, a $1 billion buy by Binance, the Fed’s response to the banking crisis, and news on the upcoming Ethereum update.

Over $300 million in leveraged BTC short positions were liquidated, resulting in over $300 million in buying pressure for BTC. This is a substantial amount during a bear market when it doesn’t take that much money to push prices up or down. The rally was also helped by Binance turning $1 billion of BUSD into BTC, ETH, BNB and other unnamed cryptocurrencies.

Another factor is the official announcement of the Ethereum Shanghai hard fork update date (April 12), which will allow users to withdraw their staked ETH and is expected to boost market demand for Ethereum. Institutional investors are expected to find ETH more attractive because they like the yield, and the possibility of earning yield on what is effectively the next payment network is an attractive prospect. It is believed that many institutions were hesitant to stake ETH because it was not possible to unstake, but that will change with Shanghai, and millions or even billions of dollars could be flowing into ETH within days. and the weeks that follow.

BTC is also considered sensitive to changes in the money supply, and as such, many have argued that the increased size of the Fed’s balance sheet was the main driver of the recovery.

Last week, the Fed and its allies effectively bailed out SVB depositors. As part of this bailout, the Fed had to increase its balance sheet by $300 billion. The Fed printed 300 billion new dollars, as Bitcoin was built in response to the 2008 bank bailouts. BTC’s price went parabolic in response to the SVB bailout. A similar drama is playing out in Europe, with UBS paying 3 billion Swiss francs ($3.2 billion) for 167-year-old Credit Suisse, which was once worth more than $90 billion. The takeover was part of an urgent plan by Swiss and international leaders to restore confidence in the banking system.

With all the talk of bailouts, there is unease about the weakness of the US banking system. The banking system is compared to a house of cards that could collapse, and the American economy is on the verge of the greatest economic catastrophe in its history. The concern is that banks that were too big to fail are now even more insolvent. Bank bailouts will devalue the dollar, and everyone who holds US dollars will pay, including taxpayers in the United States, non-taxpayers, and people around the world who have debt instruments denominated in US dollars because the dollar is degraded to finance the bailout of the banks. This news was seen as bullish for Bitcoin and the broader crypto market, as it could lead to increased investment in Bitcoin as a hedge against economic uncertainty and inflation. Bitcoin prices are on the rise due to its decentralized nature and lack of ties to traditional financial institutions

Of course, not everything will go smoothly; there will be occasional bumps, like the CFTC investigation into Binance. Bitcoin and crypto prices plummeted on this news. This should have a short-term impact on prices. In conclusion, a number of factors contributed to the recent surge in the cryptocurrency market, which saw Bitcoin gain 30%. A massive short squeeze, a $1 billion buy by Binance, news on the upcoming Ethereum update, and the Fed’s response to the banking crisis are all contributing factors. When over $300 million in leveraged BTC short positions were sold, there was a lot of pressure to buy BTC. The next Ethereum update is expected to increase demand and attract institutional investors interested in the potential return. BTC’s sensitivity to changes in the money supply also played a role in the rally, with the increase in the size of the Fed’s balance sheet being a key driver. As the cryptocurrency market continues to evolve, it is clear that world events and political decisions will continue to affect its path.

(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)


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