4 Key Factors Driving the Crypto Market Past $4 Trillion

This week, the cryptocurrency market is witnessing an impressive surge, with Bitcoin and Ethereum nearing their all-time highs, and the total market capitalization exceeding $4.2 trillion. This article outlines the top four factors driving this rally, including increased speculation that the Federal Reserve may cut interest rates before the end of the year.

Heightened Expectations for Fed Rate Cuts

A key factor driving the crypto market’s rise is the increasing likelihood that the Federal Reserve will lower interest rates in its last two meetings of the year.

Following a disappointing jobs report from ADP on Wednesday, the chances of rate cuts surged. The U.S. economy lost 36,000 jobs in September, diverging from economists’ expectations of a gain of over 50,000 jobs.

This data implies that the Fed might consider cutting rates to stimulate the economy. Typically, cryptocurrencies and other high-risk assets thrive in these conditions.

Bitcoin as a Safe Haven Asset

The crypto market has surged as investors turn to Bitcoin (BTC) as a safe-haven asset during the ongoing U.S. government shutdown. This trend mirrors gold’s recent climb to record highs this year.

A recent white paper from BlackRock pointed out that investors view Bitcoin as having robust fundamentals that reinforce its standings as a safe-haven asset amid elevated risks. The paper emphasized attributes like the capped supply of 21 million and growing demand.

The evidence of cryptocurrencies serving as safe-haven assets is evident through steady ETF inflows. Ethereum (ETH) funds recorded over $1.3 billion in inflows, while Bitcoin ETFs amassed $3.2 billion in total assets.

Seasonal Trends Boost Bitcoin and Altcoins

Seasonality has also contributed to this week’s crypto market rally. Investors are referring to “Uptober,” a pattern where the market typically rallies in October.

Data from CoinGlass indicates that Bitcoin’s price usually appreciates in October, achieving positive returns every October since 2020. The average return for October since 2013 stands at 20%, making it the second-best month following November.

Moreover, the fourth quarter is generally regarded as the most advantageous period for the crypto market throughout the year, with Bitcoin averaging an 80% return, in contrast to Q1’s 51%.

Expectations for Altcoin ETF Approvals

Another important aspect fueling the rising crypto market is the excitement regarding the potential approval of altcoin ETFs by the Securities and Exchange Commission.

The SEC has established October as the deadline for most altcoin ETF applications, including popular names like Solana and XRP. These approvals are anticipated to boost prices, likely attracting Wall Street investors, similar to past trends observed with Ethereum and Bitcoin.