Crypto Market Recovery: 6 Factors Fuelling Today’s Bounce Back

The crypto market has demonstrated a strong bounce back following a period of significant sell pressure and market uncertainty. Recent developments indicate a potential recovery with Bitcoin (BTC) leading the charge. These include end of German Bitcoin liquidation, Spot Ethereum ETF S-1 approval, whale accumulation among others.

1. Germany’s Bitcoin Selloff End & Global Tensions

Michaël van de Poppe, a ceyroi analyst, recently highlighted that “Germany has finished selling their #Bitcoin.” This extensive selloff, totaling approximately $3.5 billion since June 19, has been fully absorbed by the market. Despite this massive liquidation, Bitcoin’s price remained steady at $58,000 at the time.

Now, the BTC price reclaimed $63,000, marking a recovery. Moreover, Van de Poppe also noted the rising global uncertainty following an assassination attempt on former President Trump. He suggests this environment could be conducive for Bitcoin to gain upward momentum. In addition, it could also influence the overall crypto market positively.

2. Spot Ethereum ETF And Institutional Moves

The market is also buoyed by the imminent approval of an Ethereum ETF. Grayscale, a prominent investment firm, announced that July 18, 2024 will be the record date for the initial creation and distribution of shares of the Grayscale Ethereum Mini Trust. This distribution will see 10% of Ether holdings from the Grayscale Ethereum Trust (ETHE) transferred to the ETH Trust.

Grayscale’s confidence in the ETF approval this week has added to the positive sentiment. The ETH Trust aims to be listed on the NYSE Arca under the ticker symbol “ETH,” pending regulatory approval. Moreover, last week, all eight Ethereum ETF applicants submitted the updated S-1 filings as asked by the SEC. This development also boosts approval odds.

3. Crypto Market Analysis And Bullish Momentum

IntoTheBlock, a crypto analytics firm, observed, “Bitcoin reclaimed the $62k support level after a strong weekend. While resistance is strong above, enough bullish momentum can prevent selling pressure.” This reclaim of a crucial support level is significant, indicating strong buying interest and potential for further price appreciation.

CryptoQuant highlighted the tough conditions for Bitcoin traders. The analytics firm noted that “Bitcoin traders face a tough market with negative margins at -17%, the lowest since the FTX collapse.” According to historical trends, such low margins often precede market bottoms. This suggests a possible recovery phase, which has been witnessed in the crypto market today.

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4. Whale Activity And Miner Capitulation

Notable whale activities have also influenced the market. Justin Sun, TRON founder, withdrew 14,436 ETH worth approximately $45.5 million from Binance. This indicates a bullish stance on the upcoming ETF approval, igniting optimism in the market. Additionally, XRP whales have snapped up over 100 million XRP tokens amid rumors of a settlement in the Ripple vs. SEC case.

Miner capitulation, a historical precursor to Bitcoin price rebounds, has been significant. The Bitcoin True Hashrate Drawdown percentage recently hit 7.6%. It is identical to levels seen during Bitcoin’s $16,000 valuation amid the FTX collapse. This capitulation implies weaker miners are exiting, reducing market sell pressure and paving the way for potential price recovery.

CryptoQuant further emphasized recent buying trends among U.S. whales on Coinbase suggest additional funds may flow into Spot Bitcoin ETFs during weekdays. Earlier, last week, these ETFs witnessed $1.1 billion of inflows, further solidifying a bounce back. In addition, BTC whales scooped up $4 billion worth of BTC last week.

5. Short Liquidations And Market Dynamics

The market rebound saw substantial short liquidations, totaling $100.79 million, according to Coinglass. This amount significantly exceeded the $21 million in long liquidations. This dynamic creates buying pressure as traders mitigate losses by buying back their short positions, potentially accelerating the recovery. However, this also introduces a layer of uncertainty, as traders can manipulate the market when it peaks.

From a psychological perspective, the market appears primed for a rebound. Participants have endured a considerable period of adjustment, experiencing fear and frustration, which often sets the stage for a recovery. However, Ali Martinez, a popular crypto analyst, advised caution.

He noted, “If you’re getting in late, watch out! #Bitcoin could retest the breakout zone at $59,200 before reaching the $63,800 target.” Nonetheless, BTC recovery past $63,800 is imminent after the slight pullback. This also sets the stage for a bullish momentum in the broader crypto market.

6. September Fed Rate Cut Probability Above 90%

Signals from the Federal Reserve suggest a strong chance of an upcoming interest rate reduction, which could have a substantial impact on the crypto market. Bloomberg analyst Mike McGlone has forecasted that the Fed will lower interest rates following a downturn in US stock markets.

Looking at historical trends, significant rate hikes between 2004 and 2006 were followed by the first rate cut in September 2007. Similarly, after the recent cumulative rate increases of 525 basis points since early 2022, a rate cut is expected this coming September.

Despite the June Producer Price Index (PPI) data showing persistent inflation, the CME FedWatch tool indicates a 90.3% probability of a rate cut in September. Reduced interest rates often lead to a weaker US dollar and increased investor interest in alternative assets like crypto.

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