Yesterday; the total cryptocurrency market capitalization was about to drop below $2 trillion for the first time since September.
It has gained more than 4% in the last 24 hours to avoid this drop; thanks to Ethereal (+8%); Sunshine (8%); Binance Coin and Polkadot (both up 11%). The other parts of the top 10 are also doing well. Bitcoin (4%); Cardano (7%); XRP (6%) and Earth (10%) all recorded earnings.
So is it suddenly a bull market again; as FTX founder and CEO Sam Bankman-Fried tweeted?
two) [use your imagination]
— SBF (@SBF_FTX) January 11; 2022
Ethereum is down 33% from its all-time high of $4878 hit two months ago; nothing says it can’t get back there; the market remains uncertain.
But markets around the world are changing. The US Federal Reserve plans to raise interest rates three times this year to curb inflation. The result; according to the co-founder of Delphi Digital; Kevin Kelly; there will be a decrease in the amount of money available to borrow and spend. ” When liquidity is abundant and expanding; the $BTC and crypto assets tend to outperform; when liquidity is tight; they are in trouble“; he declared.
Bitcoin is one of the purest plays on fiat currency debasement
It also happens to be one of the most highly leveraged bets on global liquidity.
When liquidity is abundant and expanding; $BTC and crypto assets tend to outperform; when liquidity is tight; they struggle
—Kevin Kelly (@Kevin_Kelly_II) January 10; 2022
It also contributed to volatility in US stock markets. The S&P 500; which posted returns of 26.9% last year; is down just over 1% to start 2022. The NASDAQ is down more than 3% this year after rising 21.4% in 2021. to the Dow Jones; has moved sideways since the beginning of the year after posting gains of 18.7% in 2021.
Why do we mention this; given that these arejournaltimepletely different markets? Well; because they really aren’t. Stocks and cryptocurrencies are considered risky assets due to their volatility. In addition; they have behaved in a similar way lately. According to a recent report from crypto asset data firm Kaiko; the correlation between bitcoin and US stock indices is the highest since July 2020. Meanwhile; BTC’s correlation with gold is less than 0; meaning that it tends to move in the opposite direction to the inflation hedge.
In turn; Ethereum has a coefficient of 0.72 with Bitcoin in the last year; according to Crypto surveillance data where 1 corresponds to a synchronous movement.
So crypto as a whole is on the rise. For today. Come back tomorrow to see how things are.
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