What’s Driving Cryptocurrencies to Rally?

The cryptocurrency market is rallying for four main reasons. Bitcoin alone records a “jump” of more than 27% in just one month. In particular, the market attributes the rise to the following:

1) In the entry of institutional investors with the approval of a Bitcoin ETF in the US, which the market takes for granted.

2) In the upcoming halving, i.e. the reduction of new bitcoins in circulation from April 2024.

3) In boosting inflation.

4) On the grounds that the market was trading at a significant discount from the ongoing shocks and is now recovering.

Parallel with negotiation price trading volume also increased, with the seven-day average for spot exchange volumes on trusted cryptocurrency platforms exceeding $24 billion, a level not reached since late March.

The international market narrative is particularly positive for crypto. Cryptocurrencies appear to be decoupled from other markets at a time of geopolitical uncertainty, high budget deficits, and market interest in investing in artificial intelligence companies appears to be stabilizing and lacking the excitement of previous months.

Other important news at the international level with optimistic messages for cryptocurrency markets is the investment of $50 million by Saudi Arabia’s investment fund in Animoca Brands (one of the most popular cryptocurrency companies), the raising of funds for investments in cryptocurrency and other technology start-ups by the investment capital Andreessen Horowitzas well as the acquisition of a cryptocurrency exchange by Thailand’s fourth largest bank.

Arthur Hayes, the co-founder of the historic cryptocurrency exchange BitMEX and among the market’s most prominent commentators has published an essay that attributes the cryptocurrency market rally to US foreign policy and argues that the rise of the Bitcoin ETF does not lead to an increase in the top cryptocurrency’s trading price.

In his essay titled “The Periphery,” Hayes attributed the recent surge in cryptocurrency markets to the US president’s commitment to support Israel’s war effort against Hamas.

“America’s military budget is really going to explode,” Hayes said. “This will increase future government borrowing,” he added.

Hayes said institutional investors have already moved to sell bonds and Treasuries in preparation for expanded U.S. military spending and will seek returns from new asset classes.

“If long-term US Treasuries don’t offer safety to investors, then their money will look for alternatives,” Hayes said.

“Gold, and more importantly, Bitcoin, will start to rise on fears of global wartime inflation,” he noted.

However, other market analysts attribute the rise to its progress BlackRock for the approval of one ETFs that invests in Bitcoin. This narrative is also confirmed by the $326 million inflows received by institutional cryptocurrency investment vehicles last week, the largest inflow since July 2022, according to the CoinShares report.

The main reason behind the move, according to CoinShares, is the price rally fueled by growing optimism that the US Securities and Exchange Commission (SEC) will approve the first bitcoin spot exchange (ETF).

THE CoinShareshowever, noted that last week’s inflows — while quite large — ranked 21st over the past three years.