Within the past 24 hours, the cryptocurrency market has witnessed a substantial decrease in its trading volume, plummeting by more than 30%.
Yet, in defiance of this decline, there has been a slight uptick in the overall market capitalization. So, what spurs the upward trajectory of cryptocurrencies amid decreasing trading activities?
Optimistic Market Sentiment Elevates Crypto Values
The surge in crypto prices is predominantly steered by positive market sentiment. Data gleaned from Coinglass underscores that the prevailing market sentiment remains sanguine.
Currently, the Fear and Greed Index, a prevalent gauge of investor sentiment, is inclined towards “greed.”
This upsurge in greed often signals a surge in buying actions as more traders are fueled by the fear of missing out (FOMO).
This sentiment significantly contributes to the ascent of crypto prices today as FOMO drives increased purchasing, subsequently propelling prices upwards.
When the Fear and Greed Index points to greed, it usually signifies that traders are hastily entering the market, eliciting buying pressure that bolsters the prices of major assets.
Nevertheless, it is imperative to acknowledge that such upward rallies are frequently trailed by market corrections, given that FOMO can swiftly transform into FUD (fear, uncertainty, and doubt), ushering in market volatility.
Bitcoin’s Price Surge Upholds Market Expansion
Another significant factor elucidating the reasons behind the crypto upsurge is the bullish price movement of Bitcoin, the principal cryptocurrency by market capitalization.
Over the recent days, Bitcoin has broken past its $63,000 resistance barrier and maintained a stable climb, holding its position above $68,000.
Amid the most recent trading session, Bitcoin even peaked at $69,000, lending momentum to the overall market escalation.
The consistent stability of Bitcoin above crucial resistance levels fortifies the overall crypto market as its performance commonly sets the tone for other assets.
With Bitcoin upholding its upward momentum, other cryptocurrencies have mirrored this trajectory, consequently further propelling the market upwards.
Uptick in Short Liquidations Drives Prices Skyward
An examination of the crypto liquidation chart reveals another compelling reason behind the crypto surge. Notably, there has been a discernible rise in the liquidation of short positions in recent days.
On October 8th, short liquidations totaled around $71 million, while long liquidations stood at $41 million.
In the ensuing trading session, short and long liquidations were nearly equivalent, hovering around $28 million.
However, in the latest session, short liquidations surged to nearly $80 million compared to a mere $38 million in long liquidations.
This pattern of escalating short liquidations denotes that traders who bet on price downturns are compelled to close their positions as prices persist in soaring.
With the closure of short positions, the buying pressure mounts, fostering further price hikes and projecting a bullish market outlook.
Deciphering the Crypto Surge
The surge witnessed in the crypto market can be attributed to multiple factors, including the optimistic market sentiment epitomized in the Fear and Greed Index, the robust price performance of Bitcoin, and the short position liquidations.
Cumulatively, these facets are fueling the market’s upward trajectory, even in the face of dwindling trading volumes.
While the current trend exudes positivity, traders should remain cognizant that rapid price escalations might soon give rise to market corrections.