Crypto Market Resurgence: Risk-On Sentiment Drives Rally, Technicals Point to Further Gains

The cryptocurrency market surged on April 22, driven by gains in Bitcoin and Ether. The rally coincided with renewed risk appetite in traditional markets, as investors focused on upcoming corporate earnings reports. Positive inflows into Bitcoin ETFs and increased activity in crypto derivatives signaled growing investor confidence. A technical analysis suggests a bullish trendline with an upside target of $3.25 trillion, supported by the proximity to an ascending trendline and a psychological support level in the RSI.

The Resurgence of Cryptocurrency Market: Risk-On Sentiment Prevails, Driving Gains

April 22, 2023: The cryptocurrency market has witnessed a resurgence in bullish sentiment, with the total market capitalization surging by 2.65% over the past 24 hours to reach $2.38 trillion. This upward trajectory has been spearheaded by the two leading cryptocurrencies, Bitcoin (BTC) and Ether (ETH), which have experienced notable gains of 2.40% and 2.80%, respectively.

Return of Risk-On Mood

The cryptocurrency market's gains today align with the return of risk-on sentiment that has swept across traditional markets. The S&P 500 futures, a barometer of investor sentiment, has advanced by 0.33% to 5,031 points, signaling a shift away from escalating geopolitical tensions in the Middle East and towards the upcoming release of corporate earnings, including those from tech giants like Microsoft, Meta, and Alphabet.

A Bloomberg's Markets Live Pulse survey has revealed that nearly two-thirds of the 409 respondents believe that corporate earnings will boost the U.S. equity benchmark, representing the highest confidence in corporate profits since the inception of the survey in October 2022. This positive outlook on the S&P 500 has extended its influence to the cryptocurrency market, supported by the rise in their 30-day average correlation to 0.82, the highest positive correlation in a month.

Interestingly, the Bitcoin-S&P 500 correlation has strengthened since Iran's missile and drone attacks on Israel on April 13, which initially dampened investor sentiment.

Positive Bitcoin ETF Net Inflows

The crypto market's gains today are part of a larger recovery that initiated when net inflows into spot Bitcoin exchange-traded funds (ETFs) turned positive after experiencing significant outflows. On April 19, these funds collectively received approximately $60 million, marking the first positive daily net flow after encountering outflows totaling $319 million over the preceding seven days. Since then, the crypto market capitalization has rebounded by roughly 14%.

Positive net inflows into Bitcoin ETFs during periods of price decline indicate that investors remain confident in future gains, utilizing the downturn as an opportunity to accumulate assets at lower prices with the expectation of market recovery.

Increasing Activity across Crypto Derivatives

The crypto market's gains today coincide with a surge in trading activity within the derivatives market. The market's open interest (OI) in options and futures markets has increased by 1.84% and 1.19% in the past 24 hours, demonstrating growing speculation among retail investors. Institutional investors have also exhibited similar sentiment, with CME's Bitcoin Futures OI rising by 1.70% during the same period.

A notable 8.81% rise in 24-hour futures volume was also observed, suggesting an increase in market liquidity, which typically contributes to a more stable trading environment. Heightened activity in futures markets often precedes spot market movements, further indicating growing investor confidence.

Sharp Technical Rebound Underway

Various technical indicators suggest that the crypto market is poised for further bullish momentum. One key indicator is the market capitalization's rebound from the lower trendline of a bullish continuation pattern known as a bull flag. This pattern typically resolves when the price breaks above the upper trendline and ascends by the height of the preceding uptrend, indicating a potential target of approximately $3.25 trillion for the crypto market.

Reinforcing the bullish outlook is the market's proximity to its multi-month ascending trendline support. The market capitalization's bounce off this line reinforces the support level, suggesting the continuation of the long-term bullish trend.

Furthermore, the market's daily relative strength index (RSI) reading indicates psychological support around 38, a level at which rebounds of approximately 80% have historically occurred.

Disclaimer: This article does not constitute investment advice or recommendations. Cryptocurrency investments carry inherent risks, and readers should conduct thorough research before making any investment decisions.