Crypto Market Sees Surprising Gains This Week

It's been a wild week for the cryptocurrency market. Bitcoin, Ethereum, and Solana have all seen double-digit gains, making it one of the best weeks in recent memory. But what's behind these surprising gains? Let's take a look.

Macro Environment

The first and most obvious factor contributing to the recent crypto surge has been the macro environment. Inflation has been easing, with the Consumer Price Index (CPI) showing negative month-over-month data in December 2022. This has led to the assumption that the Federal Reserve will stop raising rates and may even be forced to lower them in order to prevent deflation.

Interest rates have dropped in reaction to this data, and stocks are rising as a result. As crypto often trades in unison with the stock market, it's no surprise to see crypto popping this week.

Crypto-Specific Factors

In addition to the macro environment, there have been some crypto-specific factors adding fuel to the fire. FTX's liquidators have recovered $5 billion of assets, including cash and cryptocurrencies, and are expected to return the funds to customers by March 15, 2023. This is good news for both FTX customers and the broader crypto industry.

Solana has been particularly impacted by FTX's bankruptcy since Sam Bankman-Fried, FTX, and Alameda Research were large investors in the cryptocurrency. Despite this, transaction volume and non-fungible token (NFT) prices have been increasing over the past month.

Ethereum's upcoming upgrade, known as the "Shanghai Hard Fork," has also been seen as bullish, as it will unlock tokens that have been locked and inaccessible for months.

What's Next?

It's clear that this crypto winter is starting to thaw, but that doesn't mean the market will recover overnight. Investors should keep in mind that short-term moves are still largely driven by the stock market and crypto narrative, and that there may be more risk and price drops ahead.

The biggest risk to consider is the opaque nature and potential risk that Binance, the largest crypto exchange in the world, faces. Auditing company Mazars, which previously did proof-of-reserves reports for Binance, cut ties with the company and Binance has yet to prove that it has the assets it says it does. FTX did the same thing, so it's worth being cautious.

Long-term, I'm still bullish on the crypto industry and the disruption it's bringing to the world, but investors should be aware of the risks and be prepared for more price drops in the near future.