Crypto markets experienced a surge over the weekend, regaining the $1 trillion market capitalization mark. The increase in market value is due to a combination of factors, including signs of bottoming and a record number of short liquidations.
According to data from Coinalyze, nearly $500 million in shorts, or bets against higher prices, were liquidated since Friday. This marks the highest such levels since October 2022. The liquidation figures mean that over 70% of traders booked losses as exchanges closed leveraged positions due to a partial or total evaporation of the trader’s initial margin.
Crypto exchange OKX saw the most short losses, with $256 million worth on Friday alone. Binance and Huobi followed with $125 million and $42 million in short losses, respectively. Additionally, Aptos’ native APT tokens saw over $10 million in liquidations in an unusual move as prices doubled over the past week.
The surge in crypto markets can also be attributed to strong fundamentals in the underlying networks of major tokens. Strong transactional activity on Cardano and Solana may have contributed to a surge in their native ADA and SOL tokens, respectively. Additionally, the upcoming Shanghai upgrade for ether has added to its fundamentals, while Polygon is scheduled for a hard fork this week, triggering a 22% rise in MATIC over the past week.
As a whole, major cryptocurrencies are up an average of 20% since last week, with Bitcoin surging 22% to over $21,000 and ether jumping to nearly $1,600. Solana saw the biggest increase, jumping almost 70%, trading at $24 on Monday from just $9 in the last week of December.
According to James Butterfill, head of research at digital asset management firm CoinShares, the recent rally in crypto markets is due to investors shrugging off the FTX collapse and focusing on weak macroeconomic data such as the decreasing employment and wage data, coupled with a decrease in inflation. The prospect of looser monetary policy, off the back of weaker macro data and low valuations, is what has led to the rally.
With that said, The Fed is likely to keep interest rates high for the time being, but some market players are hopeful that central banks will start easing the pace of rate rises, or even slash rates. Some economists predict a Fed rate cut could happen as soon as this year.
