Over the last 3 weeks, the cryptocurrency market experienced a significant surge, with Bitcoin leading the charge and gaining over 30%.The rally can be attributed to several factors, including a massive short squeeze, a billion-dollar buy by Binance, the Fed’s response to the banking crisis, and news on Ethereum’s upcoming 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 nearly as much money to move prices up or down.The rally was also helped by the fact that Binance turned $1 billion worth 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 stimulate Ethereum market demand.Institutional investors are expected to find ETH more appealing because they love yield, and the ability to earn a yield on what is effectively the next network for payments is an attractive prospect.It is believed that many institutions were hesitant to stake ETH because it wasn’t possible to unstake, but this will change with Shanghai, and millions, if not billions, of dollars could flow into ETH in the days and weeks that follow.BTC is also considered sensitive to changes in money supply, and as such, many have argued that the increase in the size of the Fed’s balance sheet is the key driver of the rally.Last week, the Fed and its allies effectively bailed out the depositors of SVB.
As part of this bailout, the Fed had to increase its balance sheet by 300 billion dollars.The Fed printed 300 billion new dollars, given that 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 the 167-year-old Credit Suisse, which was once worth more than $90 billion.This purchase was part of an urgent plan by Swiss and international leaders to restore trust in the banking system.With all the talk about bailouts, there is unease around how unsound the US banking system is.The banking system is being compared to a house of cards that could collapse, and the US economy is poised for the biggest economic disaster in its history.
The worry is that banks that were too big to fail are now even more insolvent.Bank bailouts will devalue the dollar, and anyone who holds US dollars will pay, including taxpayers in the United States, non-taxpayers, and people all around the world who have US dollar-denominated debt instruments because the dollar is being debased to fund the bank bailouts.This news has been seen as bullish for Bitcoin and the wider crypto market, as it could lead to increased investment in Bitcoin as a hedge against economic uncertainty and inflation.Bitcoin prices are up due to its decentralized nature and its lack of ties to traditional financial institutionsOf course, all will not be smooth sailing; there will be occasional bumps, like the CFTC’s investigation of Binance.
Bitcoin and crypto prices dropped on this news.This is likely to 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 billion-dollar buy by Binance, news on Ethereum’s upcoming update, and the Fed’s response to the banking crisis are all contributing factors.When more than $300 million in leveraged BTC short positions were sold, there was a lot of pressure to buy BTC.
The next update to Ethereum is likely to increase demand and bring in institutional investors who are interested in the return potential.BTC’s sensitivity to changes in 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 keeps changing, it’s clear that world events and policy decisions will continue to affect its path.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own.These do not represent the views of The Economic Times).