Why are cryptocurrencies popular 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 come into play here. So why are cryptocurrency prices rising?

Why are cryptocurrency prices rising?

In recent months, cryptocurrency market capitalization, the sum total of value in the market, has reached a range not seen since late 2021. Today Bitcoin (Bitcoin) trades at around $68,390 after rising 7% over the past week. This marks a 312% increase from the lows recorded in 2022 after the The FTX exchange collapsedan event that had a strong negative impact on the sector in general.

The rise in cryptocurrency prices may be due to the positive sentiment developing following new ETF approvals.

Ethereum ETF approvals may cause shortages and increase demand

In the last week, US regulators have approved more ETFs for Ethereum (ET). 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 any.

This is a big deal for two reasons. First, it could dramatically increase the amount of money flowing into the cryptocurrency market. Although investors who purchase ETF shares do not own ETH, the fund they are investing in must purchase and hold large sums of Ethereum coins to back the ETF.

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

At present, the amount of circulating ETH staked is only 27% compared to 63% for Solana and 65% for Cardano.

If Ethereum staking increases to match its peers, the supply shock problem could become even more pronounced, potentially leading to an ETH bull run.

It is worth noting that while the price of BTC fell by around 4% on May 28, ETH actually saw a price increase of 4% and is up 17% in the last month and 113% in 12 months. Investors are closely monitoring the rising cryptocurrency today for further developments.

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

Interest rates and Halving

The supply of BTC was cut in half in April, an event that often precedes a rise in the price of BTC. However, investors may have held back due to interest rates of 5.25% to 5.5%, the highest in 23 years.

Higher rates offer better returns on traditional investments like bonds and yields, and this could 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 that the Fed will cut rates before the end of the year, and speculation on such a probability could be priced into the market and boost the price of cryptocurrencies.

New data from the Consumer Price Index (CPI), 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 Gains: Coins on the Move

As in the cryptocurrency sector Not money (NOT) with an increase of 26% in 24 hours, Celestia (TIA) up by 15%, and Chiliz (CHZ) up by 11%. This week, NOT also takes first place 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 increased volatility in the cryptocurrency markets.

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