What happened
The crypto rally we have seen starting in 2023 seems to have significant momentum. It just so happens that weekend rallies have fueled much of the movement at the top CRYPTOCURRENCIES to start the year with Bitcoin (CRYPTO: BTC), Ethereal (CRYPTO: ETH) Y Solarium (CRYPTO: SUN) See 2021-style moves to kick off the year. At 4 PM ET, these top three tokens were up 3.2%, 4.5%, and 9.3%, respectively, in 24 hours.
Macro conditions remain broadly bullish for risk assets, leading to strong investor interest in riskier assets like cryptocurrencies. Core and headline PCE prices rose at the slowest pace since 2021 and the Bank of Canada raised rates just 25 basis points (0.25%), signaling a pause on the horizon. These catalysts have provided indications that a pause and turn scenario could be in play for the Federal Reserve this year. For riskier assets like cryptocurrencies, this is a big problem.
At a specific token level, these three mega-cap cryptocurrencies have their own catalysts that investors are closely watching right now. bitcoin is strong impulse this month has resulted in strong moves across a number of altcoins, with the token set for its best January in a decade, moving roughly 50% less than last year. Ethereum's upcoming update in Shanghai has led to a record amount of ETH being staked on the network, fueling demand for its tokens as investors seek the passive income potential of the world's second-largest crypto. And there's a lot of discussion brewing about Solana, with the top "Ethereum killer" seeing increased interest due to much-improved network performance and a lack of downtime seen in recent weeks.
And
There is a lot for cryptocurrency investors to unpack with these moves. On the one hand, it could be argued that these speculative assets may have been sold off too quickly last year, with the market underpricing the likelihood that monetary policy tightening will be short-lived (as now looks like it might be the case). On the other hand, many crypto skeptics point out that this rally is likely to be unsustainable, given the likelihood that a Fed pause could last longer than many anticipate.
We'll have to see what happens on the macro front. That is almost impossible to predict. One thing that has struck me this year, however, is the extent to which bullish catalysts are now being factored into valuations of key cryptocurrencies. Institutional investors It looks like you now have the green light to buy crypto with good news, and you're doing it en masse.
Now what
A few weeks of bullish momentum does not necessarily mean a multi-year bull market rally is underway. While many crypto investors may note that this risk rally looks a lot like the post-pandemic surge we saw just a couple of years ago, it's probably too early to declare this crypto winter over. Many of the headwinds that have contributed to the negative macroeconomic backdrop seen in 2022 remain.
That being said, the sample size with this recent crypto rally may be enough to suggest that momentum may hold over the medium term. Additionally, Bitcoin, Ethereum, and Solana are among the top digital assets with institutional demand. So if capital really starts flowing into this sector in a big way, this is a rally that may have legs, at least for the next several months.
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chris macdonald He has positions in Ethereum and Solana. The Motley Fool has positions and recommends Bitcoin, Ethereum and Solana. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
