The latest rally has sent the total crypto market cap back above $1 trillion.
Crypto Catches a Bid
The crypto market is showing bullish strength for the first time in weeks.
Bitcoin and many other crypto assets have soared over the past 24 hours, breaking out of tight trading ranges that have defined their price action in recent weeks. The top cryptocurrency moved above the $20,500 level Wednesday morning for the first time since September 14, signaling a bullish breakout. Per CoinGecko data, it’s currently up 7.1% on the day.
The rally has sent the total crypto market capitalization back above the $1 trillion level. As this area had been acting as a strong resistance in recent months, a decisive break above it has helped confirm the bullish impulse in the market.
There are several possible reasons for the recent crypto upswing. The U.S. Dollar Index, an instrument that tracks the dollar against a basket of other world currencies, has shown a marked decline since the start of the week. As crypto and the broader equities market have become inversely correlated with the dollar in recent months, a move down for the greenback often results in a rally for risk assets.
U.S. Treasury Secretary Janet Yellen also hinted Tuesday that the government could issue more short-term treasury bonds to improve market resilience. Doing so would likely increase U.S. dollar liquidity, another metric that appears to be correlated with the crypto market. When there is more liquidity in the financial system, crypto assets tend to rally.
While Bitcoin usually leads market surges, in this instance, the number two cryptocurrency, Ethereum, has outpaced it to the upside. Over the past day, Ethereum has jumped 14.2%, spurred on by several rounds of short liquidations. It’s currently the top performer among crypto’s major assets, beating out other Layer 1 competitors like BNB Chain and Avalanche. However, it’s not just Ethereum outperforming. Several other coins and tokens have followed its example, putting in double-digit gains.
Recent Top Performers
Within the Layer 1 space, today’s bounce has highlighted two standouts. Cardano, the longstanding Layer 1 network that recently completed its Vasil hardfork upgrade, has jumped 12.7%, despite registering a local low of $0.33 less than a week prior. The sudden strength may be attributed to the number of traders shorting Cardano before the market rallied. Due to Cardano’s slow development and technological setbacks, it is frequently viewed as overvalued. However, the eighth-largest cryptocurrency is also known for its dedicated community. ADA bulls may have come out in force to propel the coin higher.
Another Layer 1 project that’s showing strength today is Solana. Like Cardano, Solana also appeared to have broken down, hitting a new local low of $27.42 on October 21. However, it has rebounded sharply, possibly for similar reasons. Solana’s active NFT scene also may have helped it recover faster due to the baseline demand for SOL among NFT traders.
Several Ethereum-adjacent tokens are also benefiting from the market bounce. Lido and Rocket Pool, two liquid staking protocols, are up double-digits on the day. Rocket Pool has jumped 15.9%, one of only a handful of tokens to outpace Ethereum. According to data from crypto market intelligence provider Messari, Rocket Pool has grown its market share by 31% since September. As staking Rocket Pool’s native RPL token increases validators’ rewards on the protocol, the increased usage may now be reflected by increased demand.
A final standout over the past 24 hours is Optimism’s OP token. The Ethereum Layer 2 project is up 18.4% on the day. It briefly reclaimed the psychological $1 level after trading below it for several weeks. Interest in Ethereum is likely spilling over into its Layer 2 ecosystem. Optimism is currently the largest Layer 2 network with a token, so investors may be looking at it as a high beta play. Other tokens in the Optimism ecosystem are also benefiting from today’s rally. Synthetix Network’s SNX token is up 9.4%, while Velodrome Finance’s VELO has jumped 9%.
Disclosure: At the time of writing this piece, the author owned ETH, BTC, SOL, and several other crypto assets.