Crypto markets rebounded on Monday with Bitcoin (BTC) approaching $67,000, reversing declines seen over the weekend. Altcoins also rallied widely, with 163 out of 173 digital assets in the Coindesk Market Index posting daily gains. Ethereum (ETH) remained near $3,200, underperforming with a 1.5% advance. Funding rates for certain altcoins and memecoins turned deeply negative, indicating potential for a significant upward move driven by a short squeeze.
Cryptocurrency Markets Surge, Nearing Previous Highs as Fears of Correction Wane
In a significant upswing, cryptocurrency markets exhibited substantial gains on Monday, with Bitcoin (BTC) approaching the $67,000 mark. This surge allayed concerns about a deeper correction that had been lingering in the market.
Bitcoin, which recently underwent its quadrennial halving event, a process that reduces the issuance of new supply by half, witnessed a notable increase of over 3% over the past 24 hours. At the time of writing, it was trading around $66,500. Ether (ETH), the second-largest cryptocurrency, remained relatively stable near $3,200, although its growth of 1.5% during the same period was less impressive.
The upward momentum was widespread, with the majority of cryptocurrencies listed on the CoinDesk Market Index (CMI) posting positive daily returns. Out of the 173 cryptocurrencies included in the index, 163 experienced gains. The broader CoinDesk 20 Index (CDI) surged by over 3% during the day, primarily driven by Near Protocol's native token (NEAR), which exhibited a remarkable 15% increase.
This positive sentiment extended to publicly listed miners such as Riot Platforms (RIOT), which jumped by 15%, and Hut 8 (HUT), which surged by 20%. Marathon Digital (MARA) also saw an increase of 6% amidst a frenzy of trading that led to a spike in fees. As transaction fees have become an increasingly significant revenue source for miners, this development has raised expectations for improved financial performance among these companies.
Despite concerns raised by Markus Thielen, founder of 10x Research, about potential market weakness following the halving, the historical performance of Bitcoin suggests a different trajectory. QCP Capital, a crypto hedge fund, highlighted that in the past three halving events, Bitcoin's price has exhibited an exponential rise approximately 50-100 days after the event. If this pattern holds true, Bitcoin bulls have a few weeks to capitalize on the current market momentum and build long positions.
Funding rates, which represent the cost leveraged derivative traders incur to maintain open positions, have also witnessed a shift. After reaching elevated levels, they have cooled off for some larger cryptocurrencies and even turned deeply negative for some smaller ones. This negative territory, according to QCP Capital, creates an environment ripe for a swift upward move should risk appetite return.
QCP Capital anticipates the possibility of a "short squeeze," a rapid price increase triggered by the forced closing of short positions, particularly among altcoins and memecoins that have experienced sustained negative funding. This shift in sentiment could lead to short covering and a resumption of leveraged long positions.
In conclusion, cryptocurrency markets have displayed a robust recovery, with Bitcoin nearing its previous all-time high. While some analysts had expressed concerns about a post-halving correction, the historical trend suggests a bullish outlook in the medium term. Funding rates, while initially hot, have cooled, signaling potential for further upward movement if risk appetite returns.