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A crypto market rally is underway today, with Bitcoin and most altcoins staging a strong comeback. Bitcoin price rose to $106,240, much higher than last week’s low of $98,000.
Most tokens have jumped sharply, with the top gainers being the likes of Starknet (STRK), World Liberty Financial (WLFI), Artificial Superintelligence Alliance (FET), Pump, and Render, which jumped by over 15%.
Crypto Market Rally Triggered by Potential End of Government Shutdown
The main catalyst for the ongoing crypto market rally is that a group of eight Democrats voted with Republicans to end the longest government shutdown in history. These Democrats conceded that it will be difficult for the party to reach a deal with Republicans on Obamacare subsidies.
The end of the government shutdown is seen as a positive thing for the stock and crypto markets as it removes one of the most important risks in the market. Most importantly, it means that the market will start getting more clarity on the state of the American economy.
For one, the Bureau of Labor Statistics will restart publishing key macroeconomic data on areas like the labor market and inflation. It remains unclear whether the agency will publish the October inflation report this week as previously anticipated.
Rising Futures Open Interest is Boosting Cryptocurrency Prices
The other notable catalyst for the ongoing crypto market rally is the influx of inflows in the futures market, a sign that investors are adopting a more risk-on sentiment.
Data compiled by CoinGlass shows that the open interest in the cryptocurrency market increased by 6.80% over the last 24 hours to $149.8 billion. It has jumped from last week’s low of below $140 billion.
While the open interest remains below the October high of $250 billion, the fact that it is rising is a sign that it has bottomed, which will be bullish for the market.
Meanwhile, data shows that liquidations jumped by 55% in the last 24 hours to $345 million. Bitcoin shorts worth $117 million and Ethereum holders worth $89.7 million were liquidated. Other major tokens whose shorts were liquidated included Filecoin, Dogecoin, XRP, and World Liberty Financial (WLFI).
Rising Odds for Federal Reserve Interest Rate Cut as SOFR Crashes
The other notable catalyst for the ongoing crypto market rally is that traders are increasingly betting on the Federal Reserve cutting interest rates at its December meeting.
Data compiled by Polymarket shows the odds of a Fed cut rose to 72% from last week’s low of 65%. These odds have jumped because of the potential economic slowdown due to the recent government shutdown.
Additionally, there are growing concerns about the labor market following a private sector report that showed an increase in layoffs. Don’t top companies like Target, Amazon, and UPS have all announced large layoffs this month.
Meanwhile, a key interest rate in the US has plummeted to its lowest level since 2022, a move that may lead to a more risk-on sentiment among investors. The Secured Overnight Financing Rate (SOFR) has plunged to 3.92% from the year-to-date high of over 4.35%.
SOFR, which replaced the London Interbank Offered Rate (LIBOR), is the average interest rate at which leading banks and other financial services companies pay to access financing from the Federal Reserve. A falling LIBOR rate leads to more risk appetite among investors.
Summary
The cryptocurrency market rally is also underway as investors buy into the recent dip, with some analysts expecting further gains in the near term. It is also being driven by the ongoing demand for privacy tokens like Zcash, Monero, Decred, and Horizen.
However, there is still a risk that the ongoing cryptocurrency market rally is a dead-cat bounce —a situation where an asset in free fall bounces back briefly and then resumes its downtrend. It is also known as a bull trap.
