Markus Thielen, head of crypto research and strategy at Matrixport, said suggests in a potential pre-Christmas rally with Bitcoin leading the way.
This anticipation comes amid macroeconomic changes that could pave the way for a significant rise in crypto prices, which Thielen describes as the “Santa squeeze.”
Thielen’s analysis is rooted in recent market movements, where some altcoins have started to outperform Bitcoin, suggesting a surge that could translate into substantial gains.
Macroeconomic Indicators Fuel Crypto Optimism
This concept of a “Santa squeeze” in the crypto market, a term coined to describe the seasonal rally often seen in stock markets, is not new. Thielen, in his Deribit Insights report, noted that Bitcoin has historically seen an average rally of 23% during the holiday months of November and December.
This trend, coupled with last week’s performance where alternative cryptocurrencies took the lead over Bitcoin, gives credibility to predictions of a year-end rally, according to the head of crypto research and strategy at Matrixport.
In particular, the potential for a “Santa squeeze” is supported by several macroeconomic indicators identified by Thielen. Thielen points to a trio of events that collectively signal a spike in interest rates, paving the way for risky assets such as cryptocurrencies.
The U.S. Treasury’s shift toward a “slowing the pace of longer-term debt issuance” is the first sign Thielen identifies, implying expectations of falling interest rates, which historically benefit growth assets such as technological stocks and, by extension, digital currencies.
Added to this is the “accommodating” tone of Federal Reserve Chairman Jerome Powell during the meeting. post-FOMC meeting press conference. His statements were interpreted as a potential halt to rate hikes, with the possibility of cuts in 2024, bringing a dose of positivity to the markets.
For context, During the conference, Fed Chairman Jerome Powell discussed the balanced nature of inflation risks, twice referring to the term “symmetric,” which suggests a tone of accomplishment in inflation efforts. the Federal Reserve to reduce inflation. Additionally, Powell expressed his view that a recession is not on the horizon.
Additionally, according to Thielen, the unsavory U.S. nonfarm payrolls numbers released last Friday suggest a “weakening labor market,” reducing the chances of aggressive rate hikes in the future.
Bitcoin and Ethereum: a potential rally in sight?
Drawing parallels to the past, Thielen recalled Bitcoin’s response at the end of the Fed’s last rate hike cycle in January 2019, which saw the price of the cryptocurrency increase by around 400%.
While Thielen tempers expectations for a repeat of such spectacular gains, the head of crypto research and strategy at Matrixport predicts that Bitcoin and some other altcoins will analyst “higher beta crypto assets” could see considerable growth in the coming years.
The head of crypto research and strategy at Matrixport supported this bullish outlook further by the potential approval of a BlackRock spot Bitcoin ETF, which could serve as a catalyst for a more widespread crypto rally.
Thielen’s observations extend beyond Bitcoin into another report. He notes early signs of recovery in the Ethereum ecosystem, as evidenced by rising revenues and ETH’s resilience in holding the crucial support level of $1,550.
The analyst also noted the Ethereum eclipse and other altcoins relative to Bitcoin, a shift reflected in their growing market dominance and trading volumes. The funding rate for perpetual futures contracts for Bitcoin and Ethereum is also rising, reflecting a more confident stance from traders.
So far, Bitcoin is up just 1.3% over the past week and 0.3% over the past day, while Ethereum has seen a higher gain of 5% over the past week. over the last 7 days and 1% over the last 24 hours. BTC is currently trading at $34,987 and ETH at $1,897 at the time of writing.
Featured image from Unsplash, chart from TradingView