The crypto market is experiencing a significant surge today, driven by multiple factors that have propelled Bitcoin to reach a new year-to-date high. Additionally, Ripple’s (XRP) recent victory against the SEC has had a positive impact on the entire market, further contributing to the upward trend.
1. Crypto Liquidations Fuel the Rally
One of the primary driving forces behind today’s crypto market rally is the wave of liquidations of short positions. In just 24 hours, the market witnessed a total of over $180 million in liquidations. Notably, XRP saw the largest single liquidation of $2.8 million in a transaction on the BitMex exchange. Overall, XRP shorts worth $27.3 million were liquidated during this period.
2. Cooling U.S. Dollar Index (DXY) Boosts Crypto Market
Another favorable factor influencing crypto market prices is the gradual decline in the U.S. dollar index (DXY). Throughout history, when the DXY index retracts, it tends to enhance investor sentiment towards risk assets such as Bitcoin. The recent Consumer Price Index (CPI) data, showing the smallest 12-month increase since March 2021, suggests that the DXY may continue to cool off. Ideally, a declining DXY serves as a catalyst for increased confidence in cryptocurrencies and other risk assets.
As the DXY retreats (see chart below), Bitcoin and altcoins regain strength. There exists a historical correlation between a cooling DXY and the movement of Bitcoin prices and the crypto market, typically in the opposite direction.
3. Bitcoin ETF Speculations
Previously, the speculation surrounding the potential approval of the first Bitcoin exchange-traded fund (ETF) in the United States had a positive impact on the crypto market. However, the enthusiasm had somewhat diminished following the flurry of filings in early July. Nevertheless, the recent legal victory of Ripple Labs against the SEC could pose challenges for Chairman Gary Gensler in rejecting the current round of Bitcoin ETF applications.
According to Mike Novogratz, the founder of Galaxy Digital, the approval of a spot Bitcoin ETF would essentially serve as a government seal of approval for Bitcoin. This endorsement could have a profound effect on market sentiment and potentially drive further growth in the crypto market.
Source: CoinTelegraph
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