Starting two weeks ago, Crypto has found itself in a grip of a massive rally with the exchange facilitating a price increase of over 20%. The highest point yet came on Saturday, when Bitcoin exceeded the pre-FTX levels and reached $21,000 – a massive morale boost for traders.
There is talk that a crypto rally like this one could mark the end of an ongoing crypto winter that set in in early November after FTX collapsed. There may be truth to that if the trend persists, but it’s hard to say at the moment. However, there is some indication that the economy overall will begin to recover, and subsequently drive up the crypto market.
Many agree that over the past few weeks, the main factor behind the good fortune of the investment markets is the decreasing inflation rate in the U.S. Inflation decreased from over 7% to 6.5% from December to January, inspiring confidence in a wide variety of assets.
The stock market in general has been on the rise, and crypto-related securities have seen a lot of growth. Coinbase went up by 39%, while Marathon Digital (a big miner) increased by 76%. Crypto stocks, overall, experienced up to 15% of an increase in profitability compared to the week before.
The decreasing inflation rate is not the primary cause for the big bouts of growth that Bitcoin, Ether, and other cryptocurrencies experience. It's also about a new positive trend in the market for crypto-related securities. You can trace the growth of cryptocoins through the indexes that report on the market of crypto securities - in particular, the Coindex Index.
The U.S. government has been increasing interest rates. Normally, this would lead to a decrease in profitability for most investment markets, but it has been a widely successful measure at taming the inflation rates. Inflation has been a notable actor in the financial troubles many markets have experienced in the recent months.
The other driving force behind decreasing inflation is the good news surrounding the FTX trial. The lawyers for the firm found billions of liquid assets, which can be used to repay the many customers who lost money back in November because of the firm. This is a much better outcome than expected, which is driving many failed investors back into the crypto market.