Cryptocurrencies continued their ascent this morning, as bond yields dropped and investors got more optimistic about the trajectory of interest rates. There has also been an apparent short squeeze this week for several prominent cryptocurrencies.
Over the last 24 hours, the prices of Bitcoin (BTC -0.74%), Ethereum (ETH -0.69%), and Dogecoin (DOGE -3.03%) had all made significant gains.
The price of Bitcoin traded roughly 6.6% higher and hovered around $20,777 as of 10:26 a.m. ET today. The price of Ethereum traded roughly 13.4% higher and the price of Dogecoin was up 10.4%.
Cryptocurrencies have been crushed throughout the year due to aggressive rate hikes by the Federal Reserve, which have also caused bond yields to rise. The bill fell from more than 4.2 percentage points earlier this week to just over four percentage points at the time of this writing. This has given stocks and cryptocurrencies a boost as investors hope that the bulk of the Fed’s rate hikes may hit soon.
But in other news, there have been reports of a significant short squeeze fueling recent gains for Bitcoin and Ethereum. CoinDesk reported that the major exchanges were experiencing some of the largest liquidations of short positions since mid-2021.
Major cryptocurrency exchange FTX reportedly saw $745 million in temporary position liquidations across all tokens on its platform in the last day, while 908 million US Dollars in short liquidations were reported across all major exchanges in the previous 24 hours.
The price of a stock, or in this case, a cryptocurrency, increases, with investors shorting the stock choosing or being forced to hedge their position by buying asset shares, which causes the price to rise. However, not everyone is convinced that this will lead to a sustained recovery or that the pressure on riskier assets is over.
“I remain bearish in the short term, as we still need to have more visibility on signs that indicate that inflation is cooling down,” Pablo Jodar of the financial services firm GenTwo told CoinDesk.
He added: “After yesterday’s Alphabet earnings release, futures are already down. I won’t be surprised if bitcoin returns to $19,000 in the following days.”
It’s certainly been an exciting couple of weeks for stocks and cryptocurrencies. After September’s inflation data came in worse than expected and showed no signs of slowing inflation, stocks and cryptocurrencies surprisingly rose. Perhaps investors are adjusting to the current environment. And getting used to the fast Fed rates, I agree with Jodar that investors still need to see more evident signs of inflation peaking.
Until there is evidence that the pace of inflation is slowing, the Fed must remain aggressive. The only good news is that according to current forecasts, the Fed could theoretically end almost all rate hikes by the end of the year.
While the short-term remains uncertain, in the long-term, I like Bitcoin and Ethereum and still have no interest in the Dogecoin meme token as there is no real-world use and network-tech benefits.