- The cryptocurrency market cap has risen to $2.7 trillion after surging $500 billion in less than a week.
- Retail FOMO, US politics and short sellers could be driving the rally.
The cryptocurrency market is having one of its best months this year. Bitcoin [BTC] has made consecutive new highs over the past seven days, recently surpassing $81,000. Ethereum [ETH] also turned over $3,100 for the first time in three months.
The gains are widespread as the total market capitalization has surpassed the $2.7 trillion mark. In just one week, the total crypto market capitalization has increased by more than $500 billion.
Several factors have been driving this bull run and if positive sentiment continues, it could lead to more gains.
Fear of missing out (FOMO)
Cryptocurrency traders, especially short-term holders, are known to be reactive. Unlike long-term investors who often focus on fundamentals, short-term investors respond to price volatility and hype.
This behavior was seen in the Fear and Greed Indexwhich at the time of writing had a value of 76, an indication that the market was in “extreme greed”. On November 10, this index rose to 78, the highest level in a year.
Data from GoogleTrends also shows that the word ‘Bitcoin’ gained interest with a search score of 50/100. This was a notable increase from 18/100 just a month ago.
When retail interest is high, it stimulates purchasing activity, which in turn leads to price gains. However, FOMO is usually short-lived, and once buyers are exhausted, crypto prices may correct or consolidate.
Speculation from a pro-crypto Senate leader
After the Republican Party won the US elections on November 5, the focus is now on the leadership of the Senate. Speculation was rife that Florida Senator Rick Scott would take over the position of Senate Majority Leader after he was endorsed by Tesla CEO Elon Musk.
Scott is a pro-crypto senator, as he was among those who voted on the SAB 121 resolution allowing banks to take custody of digital assets.
In February 2024, Scott did too supported the CBDC Anti-Surveillance State Act proposed by pro-crypto Senator Ted Cruz. Scott opposed CBDCs, saying they enabled government surveillance. If Scott wins the vote, it could pave the way for pro-crypto laws. This could bring more gains to the market.
Short liquidations
Recent volatility in the crypto market has led to a wave of liquidations. Coinglass data shows that over the past week, short liquidations have peaked and continue to rise, as $283 million worth of shorts were liquidated in the last 24 hours.
When short sellers are liquidated, they are forced to buy to close their positions. These forced purchases tend to accelerate the uptrend. Despite liquidating more than $650 million in both long and short positions in the past 24 hours, open interest continued to rise, demonstrating overall bullish sentiment.
In fact, Bitcoin’s open interest has continued to reach new highs and stood at $49 billion at the time of writing. When open interest rises, it indicates that bullish sentiment is growing.
Read Bitcoin’s [BTC] Price forecast 2024-25
CryptoQuant CEO Ki Young Ju declared that the futures market suggested Bitcoin was ‘overheated’. Therefore, he expected that prices could correct and consolidate before the bull run continued.
However, if the current bullish momentum continues through the end of the year, it could lead to a bear market in 2025.