Crypto Prices Are Exploding, and Here’s 3 Reasons Why

After consolidating at the $19K levels for weeks, Bitcoin is finally registering some action. The rally during the past two days has seen Bitcoin gaining by around 7%. Nevertheless, this rally was highly unexpected, as seen in the short liquidations of around $1 billion. Below are the three main reasons why the crypto markers have turned green.

Optimism over Fed’s interest rates decision

The main reason why crypto markets are rallying is the US Federal Reserve. There is anxiety about whether the Fed will reverse its decisions to raise interest rates. The Fed has raised interest rates several times this year to tame inflation.

There are rumors that the Fed will make a U-turn on rate hikes after the November hike. The next Federal Open Market Committee (FOMC) meeting is expected to happen on November 1-2, during which the Fed will announce its decision on interest rates.

The FOMC meeting to be held next week is expected to result in a 0.75% interest rate hike, matching the decision made in September and July. However, if the policy is eased in the subsequent months, it could see investors returning to risky assets such as cryptocurrencies, which could trigger the onset of the next bull run.

Weakening US dollar

The US dollar has performed exceptionally well this year. However, it is now showing signs of weakness. The US dollar has performed well amid the Fed’s decision to tighten monetary policy at the expense of risk assets and other foreign currencies.

The US dollar Index is under pressure as other central banks are raising interest rates. The weakening of the USD is happening when Bitcoin and altcoins are showing signs of an uptrend, which is a bullish sign.

Bitcoin’s correlation with the traditional markets has been high this year. However, the asset has maintained an inverse correlation with the dollar. There are signs that Bitcoin’s correlation with stock markets is weakening because as Bitcoin rallied over the past day, Nasdaq futures remained down.

Moreover, some analysts have also argued that Bitcoin’s correlation with gold indicates that the price has bottomed, marking the onset of the next bull run. If Bitcoin is no longer correlated with stocks, a return in volatility could result in major price swings.

Bitcoin’s volatility is low

Last year, Bitcoin recorded record-high volatility, with the price dropping or gaining by record numbers within a short time. In April last year, Bitcoin rallied to above $50K before dropping to below $30K in May. By November, it had rallied again to above $69K.

However, such price movements have not been seen this year. Therefore, traders are now seeing slight gains as notable price movements. As the Bitcoin volatility index recently hit multi-year lows, traders now anticipate that the coin will take time before abandoning the trait.

However, a spike in volatility will largely depend upon macro factors. Nevertheless, holding the $19K levels and failing to move for weeks indicates that the only way Bitcoin could go is up. Therefore, slight gains are bound to excite the market about a massive bull run to come.

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