Key Insights
- The recent crypto market rally continued this week.
- Bitcoin moved above $92,000 as the market capitalization of the industry hit $3.2 trillion.
- There is a risk that this is not the start of a crypto bull run.
The crypto market rally continued on Monday, with the valuation of all tokens jumping to over $3.16 trillion. Bitcoin surged to over $92,000, while tokens like Virtuals Protocol, Render, BitTorrent, and FET were the top gainers on Monday, rising by more than 10%.
This article examines the reasons behind the crypto rally and whether it marks the beginning of a new bull run in the industry.
Crypto Market Rally Happens as Risk-On Sentiment Prevails
The ongoing crypto market rally happened as investors embraced a risk-on sentiment. One reason for this is a situation known as the January Effect, where financial assets rally in the first days of the year.
This effect typically occurs as investors return to the market after the Christmas and New Year holidays. It also happens as investors start buying assets after selling them for tax loss harvesting in the final weeks of the year.
Three main signs explain why the risk-on sentiment has prevailed. First, data compiled by CoinMarketCap shows that the 24-hour volume jumped by 27% to $94.2 billion.
Second, CoinGlass data shows that the futures open interest rose to $140 billion in the last 24 hours. This represents a significant increase, as the interest rate bottomed at below $125 billion last month.
The surge in open interest is a sign that investors are deploying more leverage, a sign of more demand. Most notably, the soaring open interest coincided with a surge in liquidations, which moved to over $256 million.
Finally, as the chart below shows, the Crypto Fear and Greed Index has risen to the neutral zone of 42 from its low of 10 last year. It was at the fear zone of 30 last week and 25 last month.
Crypto prices normally do well when the index is rising, as it incentivizes more risk-taking among investors.
Maduro Capture, Federal Reserve, and CLARITY Act
The crypto market is also doing well after the weekend events that saw Donald Trump arrest Nicolas Maduro, Venezuela’s president. He was brought to New York, where he will face drug trafficking charges.
In theory, Maduro’s capture is bullish for the crypto market. For one, it means that the US will ultimately remove sanctions on the country’s oil. That could lead to lower prices and inflation. However, this process will take years as the country will need billions of dollars in investments.
Meanwhile, the cryptocurrency market rally continues as traders await further progress on the CLARITY Act. The Senate will have a markup this month, and most traders on Kalshi expect it to pass this year. This bill will improve the regulatory situation in the US by separating roles between the SEC and CFTC.
The market also expects the Federal Reserve to continue cutting interest rates this year. Fed minutes released last week showed that most officials expect further cuts if inflation continues to fall.
Additionally, Ethereum and Bitcoin ETFs got off to a strong start in the year. Bitcoin funds added over $400 million on Friday, while Ethereum added $174 million.
Is this the Start of a Crypto Bull Run?
The ongoing crypto market rally has raised hope that a new crypto bull run is starting. However, technical analysis on Bitcoin calls for caution. As the chart below shows, Bitcoin remains below the important resistance level at $94,700, where it failed to move above in December.
BTC also remains below the 100-day moving averages and the Supertrend indicator. It is also forming a bearish flag pattern, a common sign of bearish continuation.
Therefore, while a rebound is possible, there is also a risk that the ongoing Bitcoin rebound is a dead-cat bounce. It could lead to more downside in the near term.
A continuous crypto market rally will be confirmed when Bitcoin price rises above the 100-day moving average and flips the Supertrend indicator green. A Bitcoin price rally will lead to more gains among other cryptocurrencies in the near term.
Crispus is a distinguished Financial Analyst at, bringing over 12 years of expertise in cryptocurrency markets, specializing in Bitcoin and altcoins. Renowned for his sharp insights at the nexus of market trends and breaking news, Crispus delivers actionable analysis to empower investors. His work is prominently featured across leading platforms, including BanklessTimes, CoinJournal, HypeIndex, SeekingAlpha, Forbes, InvestingCube, Investing.com, and MoneyTransfers.com, cementing his reputation as a trusted voice in the financial world.
