Why is crypto hot today? Complete analysis

The cryptocurrency market capitalization now stands at $2.57 trillion, after fluctuating between $2.17 trillion and $2.7 trillion since March. Many macroeconomic factors are at play here. So why are cryptocurrency prices rising?

Why are cryptocurrency prices rising?

Crypto market capitalization, the sum total of market value, has reached a range not seen since late 2021 in recent months. Today, Bitcoin (Bitcoin) is trading around $68,390 after rising 7% last week. This marks a 312% increase since the lows seen in 2022 following the FTX exchange collapsedan event that had a major negative impact on the industry in general.

The crypto price rise could be due to the positive sentiment that is now growing as a result of the new ETF approvals.

Ethereum ETF approvals could cause shortages and increase demand

Last week, US regulators have approved several ETFs for Ethereum (ETH). An Ethereum ETF, or exchange-traded fund, is an investment fund offered on exchanges with ETH as the underlying asset. ETFs allow traders to bet on the price of ETH without actually owning it.

This is important for two reasons. First, it could greatly increase the amount of money flowing into the crypto market. Although investors purchasing ETF shares do not own ETH, the fund they are investing in needs to purchase and store large sums of Ethereum coins to secure the ETF.

Thus, an ETF can create a supply shock or scarcity of the underlying asset, making it more scarce and, in some cases, more valuable. The SEC approved not just one ETF, but 8 different funds.

As it stands, the amount of circulating ETH staked is just 27%, compared to 63% for Solana and 65% for Cardano.

If betting on Ethereum increases to match competitors, the supply shock problem could become even more pronounced, potentially leading to an ETH bull run.

It is important to note that while the price of BTC fell by about 4% on May 28, ETH actually saw a 4% price increase and is up 17% in the past month and 113% in 12 months. Investors are closely monitoring the cryptocurrency surge these days for further developments.

Open interest for Ethereum futures on centralized exchanges also hit a record high and Bitcoin ETF inflows, or money invested, increased this week, indicating an overall bullish sentiment.

Interest Rates and Halving

The supply of BTC was halved in April, an event that often precedes a rise in the price of BTC. However, it is possible that investors held back due to interest rates being between 5.25% and 5.5%, the highest in 23 years.

Higher rates offer better returns on traditional investments like bonds and yields, and this can make riskier investments like Bitcoin less attractive.

The Fed recently indicated that rates will likely remain unchanged through the summer. However, there are six more chances for the Fed to cut rates before the end of the year, and speculation that this is likely to occur could be being priced into the market and driving up the price of crypto.

New data from the Consumer Price Index (CPI), which is used to measure inflation, will be released on June 12, and this could impact the Fed’s decision, another possible factor in today’s price action.

Today’s Biggest Gainers: Currencies on the Move

How in the crypto space are Notcoin (NO) with an increase of 26% in 24 hours, Celestia (AUNT) which increased by 15%, and Chiliz (CHZ) an increase of 11%. This week, NOT also takes the top spot with a 68% increase. FLOKI is up 33% this week and ONDO is up 30%.

As the macroeconomic situation continues to evolve, we will likely see more volatility in the crypto markets.

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