After a disastrous 2022 that was caused by macroeconomic situations, the global cryptocurrency market made a strong recovery last year. The resurgence has carried on to 2024, with Bitcoin (BTC) hitting the coveted $50,000 mark for the first in over two years, earlier this week.
The cryptocurrencies in the lead are Bitcoin (BTC) and Ethereum (ETH), both of which have showcased incredible stability since the turn of the year and have been trading in green with a marginal rise.
This article takes a good look at the various factors that are driving the latest surge and giving investors a well-needed confidence boost.
Crypto On The Road To Recovery
The overall sentiment in the market has shifted from “fear” to “neutral” and now to “greed”, all in a month. Bitcoin, the world’s leading cryptocurrency, has been rising exceptionally since last October, on the back of the possible listing of the highly-anticipated spot Bitcoin exchange-traded funds (ETFs).
At the time of writing, BTC is trading at $51,853 – down 0.8% in the last 24 hours. The world’s most traded cryptocurrency is hovering over the $50,000 level for the first time since December 2021.
Bitcoin has a market capitalization of $1.017 trillion as of February 16. As a result of the recent surge, the apex cryptocurrency managed to surpass Tesla, Berkshire Hathway, and Walmart in market value.
For Bitcoiners, this year is a special one because the block reward halving event is expected to take place on April 29. The Bitcoin Network has 10,829 blocks to go until the rewards for creating a block are cut in half. As of now, for each block mined, miners receive 6.25 BTC as a reward. This will come down to 3.25 BTC post-halving.
The halving, which is a once in a four-year event, is often associated with a rise in the price of Bitcoin, and this year will be no different.
Meanwhile, Ethereum (ETH), the world’s second-largest cryptocurrency by market cap, has also displayed signs of life after going through a slight price correction. Ether has managed to reclaim its highest valuation since April 2023, which was related to the successful launch of Ethereum’s “Shapella” hard fork.
At the time of writing, Ether is trading at $2,824 – up 1% in the last 24 hours.
What Caused The Market To Rise?
Usually, the crypto markets tend to get a little volatile as soon as the US Federal Reserve makes any announcements. For this reason, market experts keep a close watch on major monetary developments that could directly impact the crypto market’s liquidity. Interest rates on the US Dollar can affect equities, commodities, and even cryptocurrencies.
The market was able to gain massive support earlier this month due to several positive factors, including inflation-tackling methods adopted by the Federal Reserve and the weakening of the dollar index in the US. These events were instrumental in boosting the overall market sentiment.
How Does The Future Look For The Crypto Market?
A host of events put the market under a lot of pressure like the SEC’s allegations and charges against major cryptocurrency exchanges, including Coinbase and Binance.
However, cooling inflation in the United States and several other global economic factors have helped balance the market’s downside momentum, especially in the case of Bitcoin (BTC), Binance Coin (BNB), Solana (SOL), Ethereum (ETH), and Dogecoin (DOGE), among others.
The Fed has decided to keep interest rates on the dollar relatively steady during June’s Federal Open Market Committee (FOMC) meeting. They paused the 15-month cycle of rate hikes, which has helped push the dollar toward the upside and increased the volatility of the US national treasury bonds.
Such an event could lead to investors putting money into risk-taking assets such as cryptocurrencies, which answers the question of what is causing the surge in market demand.
Back in June, the FOMC agreed to halt hiking borrowing interest rates on the dollar to assess the impact of its growth and combative tightening campaign on inflation. Additionally, last year’s banking collapse led to many people losing trust in the traditional banking system, with many pivoting to decentralized finance (DeFI), which has been a blessing in disguise for the wider crypto market.
The banking fiasco caused massive losses to various bond holdings, which forced the Federal Reserve to go easy on the rate hikes to combat rising inflation in the US economy. At the time of writing, the US inflation rate stands at 5.25%.
There is also hope that upcoming monetary policies will include Bitcoin, which in itself would be a remarkable achievement for the digital asset class.
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