The crypto market is currently witnessing a significant uptrend. Bitcoin [BTC] has achieved new record highs over the past week, with the price surpassing $81,000. Ethereum [ETH] has also exceeded $3,100 for the first time in three months.
The market has seen widespread gains, pushing the total market capitalization above $2.7 trillion. In just a week, the total crypto market capitalization has increased by over $500 billion.
Several factors are contributing to this bullish trend, and if the positive sentiment persists, it could lead to further gains.
Fear of Missing Out (FOMO)
Short-term cryptocurrency traders are known for their reactive nature. Unlike long-term investors who focus on underlying factors, short-term traders respond to price fluctuations and hype.
This behavior is evident in the Fear and Greed Index, which currently stands at 76, indicating “extreme greed” in the market. On November 10th, the index peaked at 78, its highest level in a year.
Google Trends data also reflects growing interest in the term “Bitcoin,” with a search score of 50/100, a significant increase from 18/100 just a month ago.
High retail interest tends to drive buying activity, leading to price increases. However, FOMO is typically short-lived, and once buying interest wanes, crypto prices may experience corrections or consolidation.
Speculation Surrounding a Pro-Crypto Senate Leader
Following the November 5th US elections, attention has shifted to the Senate leadership. There have been speculations that Florida Senator Rick Scott could become the Senate majority leader after receiving an endorsement from Tesla CEO Elon Musk.
Scott has shown support for cryptocurrencies by voting for the SAB 121 resolution earlier this year, which allowed banks to custody digital assets. In February 2024, he backed the CBDC Anti-Surveillance State Act by Senator Ted Cruz, opposing CBDCs due to concerns about government surveillance.
If Scott assumes the leadership position, it could pave the way for more pro-crypto legislation, potentially boosting market gains.
Short Liquidations Impact
Recent market volatility has led to a surge in liquidations, particularly short positions. Coinglass data reveals a significant increase in short liquidations, with $283 million worth of shorts being liquidated in the past 24 hours alone.
When short sellers are forced to cover their positions, they trigger buy orders, accelerating the upward trend. Despite over $650 million in both long and short positions being liquidated in the last day, the rising open interest signals overall bullish sentiment.
Bitcoin’s open interest has reached a new high of $49 billion, indicating a growing bullish sentiment. However, CryptoQuant CEO Ki Young Ju warned that the futures market indicates Bitcoin may be “overheated,” suggesting possible price corrections and consolidation ahead.
If the current bullish momentum continues, a bear market may emerge in 2025.