Cryptocurrency market cap has gained over 4% in 24 hours after threatening to drop below $2 trillion
Yesterday (10), the total market cap of cryptocurrencies was on the verge of falling below $2 trillion for the first time since September. He has gained over 4% in the last 24 hours to avoid this fate.
Led by Ethereum (up 8%), Solana (up 8%) and Binance Coin and Polkadot (both up 11%). Other coins in the top 10 are also rising, with Bitcoin (4%), Cardano (7%), XRP (6%) and Terra (10%).
In 2021, a year in which Ethereum rose from a price of $735 to $3,700, it still weathered 164 days of losses interspersed between its 201 days of gains. On 52 occasions, ETH has put together a one-day bull run before falling again, according to data from Investing.com.
In other words, there’s no reason to expect this to be more than a temporary blip. On the other hand, with ETH 33% away from the all-time high of $4,878 set two months ago, there’s nothing to say it can’t go back there.
But markets around the world, and especially in the US, are in flux. The Federal Reserve expects to raise interest rates three times this year to cool inflation. The result, according to Delphi Digital co-founder Kevin Kelly, is a decline in the amount of money available for borrowing and spending.
“When liquidity is plentiful and expanding, BTC and crypto assets tend to outperform, when liquidity tightens they struggle,” he wrote yesterday.
This has also contributed to volatility in US equity markets. The S&P 500, which posted returns of 26.9% last year, is down just over 1% in early 2022. The NASDAQ is down more than 3% this year after increasing in value by 21.4% in 2021.
Why are we mentioning this, since they are completely different markets? Well, because they’re not. Stocks and cryptocurrencies are considered risky assets due to their volatility. Also, they have been behaving similarly lately.
According to a recent report by crypto data firm Kaiko, the correlation between Bitcoin and US stock indices is the highest since July 2020. BTC’s correlation with gold, meanwhile, is lower than 0, which means that it tends to move in the opposite direction of the inflation hedge.
In turn, Ethereum has a coefficient of 0.72 with Bitcoin last year, according to data from Cryptowatch, where 1 is equal to moving in perfect unison.