A crypto market rally is happening, with Bitcoin and most altcoins being in the green. Bitcoin jumped to $87,000 on Monday, while the market capitalization of all tokens jumped to the $3 trillion mark. Some of the top gainers were coins like Canton, Hedera, Story, Bittensor, Kaspa, and Hyperliquid, which jumped by over 6%.
Crypto market rally happening as investors buy the dip
A potential reason for the ongoing crypto market rally is that investors are buying the dip after plunging by double digits in the past few weeks.
It is common for investors to buy an asset after plunging hard after some time. In this case, the ongoing crypto market rally could be happening as investors anticipate more gains over time now that most coins have become bargains.
However, the ongoing buying the dip could also be part of a dead-cat bounce, a situation where an asset in a freefall bounces back briefly and then resumes the downtrend.
Investors are also buying the dip after Bitcoin and altcoins became highly oversold. For example, Bitcoin’s Relative Strength Index (RSI) moved to a low of 27 on Friday.
Stock market rally
Another possible reason why the crypto market rally is happening is that investors are paying close attention to the performance of the stock market, which is gaining momentum.
American stock index futures are all in a strong uptrend, with the Dow Jones, S&P 500, and the Nasdaq 100 indices rose by 150, 40, and 200 points, continuing the Friday’s gains. The three gained by 493, 65, and 195 points, respectively.
The same is happening in other countries, with top indices like the KOSPI, Hang Seng, and ASX Indices rising by over 1% on Monday.
It is common for the crypto market to rally when top stock market indices are rising because the two assets are closely correlated.
Futures open interest rising
The ongoing crypto market rally is happening as third-party data points to improvements in the futures market.
Data compiled by CoinGlass shows that the futures open interest jumped by 1.9% in the last 24 hours to $127 billion. Bitcoin’s open interest rose to $60 billion, its highest level since November 21 and much higher than the weekend low of $58 billion.
Soaring futures open interest is a sign that investors are starting to gradually use leverage. Still, the open interest remains significantly lower than the October high of over $225 billion.
Meanwhile, liquidations retreated in the past few days, meaning that fewer bullish positions are being closed forcefully today.
XRP and Dogecoin ETF approvals
The other potential catalyst for the ongoing crypto market rally is that investors are anticipating the approval of some altcoin ETFs in the next few days.
Grayscale will launch the spot XRP and DOGE ETF this week and the Chainlink fund next week. Other similar ETFs will be unveiled this week.
Grayscale Dogecoin ETF $GDOG approved for listing on NYSE, scheduled to begin trading Monday. Their XRP spot is also launching on Monday. $GLNK coming soon as well, week after I think
These launches are coming at a time when demand for altcoin ETFs are doing well. Data shows that the spot Solana ETFs have added over $510 million in inflows, while XRP funds added $422 million. The Canary Litecoin ETF had inflows of $7.26 million, while Hedera has gained by $76 million.
Rising Federal Reserve interest rate cuts odds
The crypto market rally is also happening as investors focus on the rising odds that the Federal Reserve will start cutting interest rates.
Polymarket data shows that these odds have jumped to 70% from last week’s low of 50%. Similarly, the CME Fed Futures odds for a cut rose to 67.1%. A rate cut and the end of the quantitative tightening will be bullish for the crypto market.
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