Here’s Why the Crypto Market Is Skyrocketing Sharply Today

The crypto market is going up on Boxing Day as investors started to buy after the recent dip. Bitcoin jumped to $89,000 on Friday. At the same time, Ethereum was a few points below the important resistance level at $3,000. The market capitalization of all coins rose to $2.9 trillion.

Crypto Market is Going Up as Hopes of a “Santa Claus Rally” Rise

One potential catalyst for the crypto market rally is that investors are likely positioning themselves for the Santa Claus rally. This normally happens in the last few days of the year.

These hopes are also happening in the stock market. There, top indices like the Dow Jones and the S&P 500 Index futures rose modestly. Global indices like the Nikkei 225 and the Hang Seng also continued rising.

Other assets like gold, silver, and copper also continued their Santa Claus rally. They reached to their new all-time highs.

There are several reasons why a Santa Claus rally happens. For example, it happens amid optimism during the holidays, lower trading volume, and the historical perception. This pushes people to assets like stocks and cryptocurrencies.

Rising Futures Open Interest and Volume

Investors return to the crypto market. They had stayed on the sidelines before Christmas. Their renewed activity pushes prices higher.

Spot market volume surged 20% in the past 24 hours. Bitcoin’s trading activity climbed close to $35 billion. CoinMarketCap data highlights the sharp increase in momentum.

At the same time, demand rose modestly on December 25. Data compiled by CoinGlass shows that the futures open interest rose by 0.50% in the last 24 hours to over $127 billion. Rising open interest is a sign that investors are applying leverage, which normally boosts demand.

Upcoming Bitcoin and Options Expiry

Meanwhile, the crypto market is going up as investors wait for the upcoming Bitcoin and Ethereum options expiry.

Data shows that the options positions worth over $28 billion will happen later today. This will be the largest expiry of the year.

Bitcoin’s open interest is oscillating at around $100,000, while calls are around $85,000. The put/call ratio is between 0.35 and 0.38, which is a highly bullish skew. Historically, there is usually high volatility before and after the options’ expiry.

Bank of Japan Rate Hikes Odds Drop

Investors expect the Bank of Japan to keep rates unchanged next year. This anticipation fuels confidence in risk assets. As a result, crypto prices continue to climb.

A report by the statistics agency showed that Tokyo’s core consumer inflation dropped from 2.8% in November to 2.3% in December. Its headline Consumer Price Index dropped from 2.7% to 2.0%.

Another report showed that retail sales dropped to 1%, while industrial production turned negative in October. Therefore, these numbers may make it difficult for the bank to hike interest rates as officials hinted in the last meeting.

BoJ actions are important for the crypto market because of its role in the financial services industry. There, it holds trillions in assets. It is also the biggest holder of US debt. The bank recently hiked rates by 0.25% to the highest point in three decades.

Potential Dead Cat Bounce or a Bull Trap

Still, as the crypto market has shown in the past few months, the ongoing rebound could be a dead-cat bounce. It is also known as a bull trap.

A dead cat bounce is a situation where a falling asset bounces back, trapping retail traders. Then, it resumes the downtrend. Most of the recent rebounds have faltered, with top companies like BlackRock and Wintermute dumping their tokens.

Besides, key challenges in the crypto industry remain. For example, Bitcoin and Ethereum prices remain below their 50-day and 100-day EMA and have formed bearish pennant patterns.

They also remain below their Supertrend indicators. This means that the downtrend may resume in the near term. Bitcoin ETF outflows have continued this week.