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Why is the crypto market up today?

Upward market graph with crypto bitcon logo on the top left and a guy in the middle pointing his two fingers upward.

The crypto market is up today as Bitcoin and Ether rallied to new 2023 highs and Cardano and numerous altcoins tacked on notable gains. The positive growth was led by Bitcoin, which topped $40,000 for the first time in 19 months on Dec. 3. Coinciding with gold hitting an all-time high, Bitcoin price then topped $42,000 on Dec. 4, setting a 20-month high.

Crypto performance map. Coin360
Crypto performance map. Coin360

Bitcoin continues to leave centralized exchanges

The crypto market’s price gains in the past 24 hours follow a period of rising withdrawals from centralized crypto exchanges.

For instance, over 20,000 Bitcoin have left crypto exchanges since Nov. 15, according to Coinglass data.

Bitcoin balances on exchanges. Source: Coinglass
Bitcoin balances on exchanges. Source: Coinglass

The reduction in Bitcoin balances across crypto exchanges has largely coincided with rising prices. This signals traders taking custody of their Bitcoin holdings while depleting selling pressure in the market.

The improvement in sentiment is also reflected by the Bitcoin Fear and Greed Index, which shows ‘greed’ at a monthly high, while also being up 8-points on the week.

Bitcoin Fear & Greed Index. Source: Alternative.me

Institutional investor inflow to crypto hits a record high

The first sign of institutional interest in crypto outside of Bitcoin started on Nov. 9, when BlackRock’s plans for a spot Ether exchange-traded fund (ETF) were confirmed through a 19b-4 form filing submitted to the United States Securities and Exchange Commission (SEC). After the confirmation, Ether price surged 12.2%, outperforming Bitcoin for the first time in months.

BlackRock’s potential foray into Ether indicates that institutional investors are becoming more interested in the cryptocurrency market. Institutional involvement in the crypto market could lead to a significant influx of capital into the Ether market, further driving up prices.

The growing institutional investor interest is improving sentiment across the market. Institutional investor inflows into the crypto market suggest that Ether’s outperformance is not just a one-off event and could continue in the near term.

Over the last 10 weeks, there was a total of $1.76 billion in inflows, which is the highest on record since October 2021. The record inflows also produced net flows of Ether, hitting $10 million for the first time this year.

Crypto market inflows by asset. Source: CoinShares
Crypto market inflows by asset. Source: CoinShares

Total value locked and trading volumes spike

The positive sentiment in the crypto market is rippling throughout the ecosystem. Bitcoin and altcoin market trading volume reached $44.1 billion on Nov. 9. Although the high for daily trading volume in December is $20 billion, it remains above September levels.

Total crypto market trading volume. Source: Newhedge

Trading volume is not the only metric that remains elevated. On Dec. 4, the total value locked (TVL) in DeFi platforms hit a multi-month high, reaching its highest level since June 3. The TVL increase to $49.7 billion marks a 1.5% increase over a 24-hour period.

Crypto market TVL. Source: DefiLlama
Crypto market TVL. Source: DefiLlama

There is optimism surrounding the increase in volume and TVL, which helped break November’s 2-year losing streak.

Bitcoin returns by month. Source: Newhedge
Bitcoin returns by month. Source: Newhedge

While Bitcoin and altcoins still have overhanging risk events that could impact the price, the increasing institutional interest and improved trading volumes are strong indications the bear market may have ended.

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