Crypto Markets Are On Fire Again Due to CPI Data and Hopes for Cool Regulation in the Trump Era
The crypto market is going crazy! On January 6, the total global crypto market capitalization broke through $3.5 trillion again, up 3.2% in a day. Bitcoin is the main star, getting closer to the psychological figure of $100,000. Meanwhile, XRP, Solana, and Dogecoin also showed off, rising 7.7%, 7.2%, and 4.5% respectively.
What caused the crypto market to suddenly surge? Two main things: the fairly good US CPI (Consumer Price Index) data and the hope that US President-elect Donald Trump will make crypto regulations more friendly.
CPI Data Makes Investors More Calm
The December CPI report released on January 15 was one of the drivers of the increase. The CPI rose 0.4%, slightly higher than the 0.3% forecast. On an annualized basis, the CPI rose 2.9%—in line with analysts’ expectations. The core CPI, which excludes food and energy prices, also rose 0.2%, in line with market expectations.
Although inflation is still above the Federal Reserve's (Fed) 2% target, this figure makes investors more optimistic. The Fed previously said it would be tough on inflation, but now the market is confident that interest rates will remain at their current position. The probability even broke through 97.3%, up from 93.6% last week, according to the CME FedWatch tool.
Short Liquidation Fuels Rising Stocks
It's not just macroeconomic data that is driving crypto prices up, liquidation of short positions in the derivatives market is also fueling the increase. In the last 24 hours, $347 million of positions were liquidated, and $212 million of them were from short positions.
Bitcoin is in the spotlight with $58.42 million worth of short positions being liquidated. The largest transaction actually occurred on Binance, with a single ETH/BTC order worth $12.61 million. Many short traders were shocked by the market euphoria, especially ahead of Trump's inauguration on January 20. His administration is expected to make crypto regulations more relaxed, perhaps even creating a national Bitcoin reserve for the US!
Crypto Market Cap Rises
The total crypto market cap also managed to return to the important level of the 50-day simple moving average (SMA) at $3.37 trillion. This level is now a kind of foothold for further increases, with the next target at $3.51 trillion.
But be careful, if selling pressure suddenly increases again, the crypto market could fall back below the 50-day SMA, with key support around $3.15 trillion.
With positive momentum like this, many are confident that optimism will continue, especially since Trump will be officially inaugurated. Who knows, crypto will be fried even more!
