Following the Federal Reserve’s Wednesday announcement to raise interest rates by 75 basis pointsbitcoin climbed as high as $24,292 early Friday morning, and is up more than 20% since its most recent low of $18,728 on July 2.
Ether has more than doubled bitcoin’s gains over the same period, jumping as much as 57% from $1,009 to $1,737 as of Friday morning, a price the second-largest cryptocurrency hasn’t seen since credit dried up for dozens of crypto firms at the beginning of June.
“Really what’s driving all of this is expectations about future inflation or lack thereof,” Sam Bankman-Fried, FTX founder and CEO told Yahoo Finance earlier this week.
“When you see market movements, a lot of what’s happening is that there’s been a shift in sentiment about whether monetary supply is increasing or decreasing and that’s all coming from [how] the Fed responds,” Bankman-Fried added.
To be sure, the total market capitalization for all crypto assets is still down roughly 60% from its peak reached in November 2021. But cryptocurrency prices have rebounded over the first half of July with fresh buying having sent the sector’s total market cap back above $1 trillion.
The 200-day moving average (DMA), which traders use as a technical gauge for whether an asset’s trend is broadly higher or lower, still sits far above current levels and is declining for both bitcoin and ether.
For bitcoin and etherthese declining 200-DMAs stood at around $34,270 and $2,352, respectively, as of Friday morning.
Luke Farrell, a crypto trader with digital asset market maker GSR, noted the US dollar’s strength appears to have peaked in roughly the same 24-hour stretch during which bitcoin hit its relative July bottom at $19,134 per coin. The broad dollar index (DX-Y.NYB) has fallen by more than 2% since peaking in mid-July.
Michael Safai, a partner with crypto trading firm Dexterity Capital, told Yahoo Finance, the US central bank set expectations for a 0.75% rate hike earlier this month, and that confirmation was enough to change the market’s direction.
“The Fed isn’t willing to move the economy into an acute recession, which buoys stocks and, as a result, crypto,” Safai added. The recent crypto rally, however, remains primarily driven by macroeconomic conditions, which leaves crypto markets vulnerable ahead of the next Fed meeting, in Safai’s view.
As far as crypto fundamentals go, Farrell sees anticipation of Ethereum’s merge as a potential positive for markets through the summer. Core developers of the Ethereum blockchain have been slated its software upgrade from proof-of-work to proof-of-stake, the so-called “Merge,” for as early as the week of September 19.
“People like hearing hard dates, they like hearing increasing confidence from the Ethereum developer community, they like to see about the continuous success from these ‘dress-rehearsal’ merges and now we’re getting past the over sold conditions we saw a month ago ,” Farrell added.