Why is the crypto market up today?

The crypto market is up today as Bitcoin (BTC), Ether (ETH), Cardano’s ADA (ADA), XRP (XRP) and numerous altcoins rallied higher. The price breakout resulted in the total market cap reaching a one-year high of $1.8 trillion on Jan. 11.

Crypto performance map. Coin360

Let’s examine three major factors influencing today’s crypto market rally.

Attention shifts to potential spot Ether ETF

On Jan. 10, the United States Securities and Exchange Commission officially approved spot Bitcoin exchange-traded funds (ETFs) for ARK 21Shares, Invesco Galaxy, VanEck, WisdomTree, Fidelity, Valkyrie, BlackRock, Grayscale, Bitwise, Hashdex and Franklin Templeton. Trading for the products started on Jan. 11, with iShares Trust gaining 22.5% in premarket activity.

The first sign of institutional interest in crypto outside of Bitcoin started on Nov. 9, 2023, when BlackRock’s plans for a spot Ether ETF were confirmed through a Form 19b-4 filing submitted to the SEC. BlackRock is the world’s largest asset manager, controlling over $8 trillion in assets under management and a having strong ETF approval record, with 576 approvals and only one denial.

BlackRock is not the only institution seeking approval. Other spot Ether ETF applicants include VanEck, ARK 21Shares, Hashdex, Grayscale, Invesco Galaxy and Fidelity. The growing institutional investor interest is improving sentiment across the market and suggests that Ether’s performance is not just a one-off event and could continue in the near term. The SEC deadline for a decision to approve or deny the application is May 23.

Spot Ether ETF applicants and deadlines. Source: Bloomberg

While institutions do not believe Ether will overtake Bitcoin price, a spot ETF approval could bring in over $2.4 billion of capital inflows.

Related: MakerDAO’s plan to bring back ‘DeFi summer’ — Rune Christensen

Crypto liquidations push short traders out

The crypto market rally has fueled a wave of short position liquidations across the market, totaling over $183.6 million in 24 hours. While Bitcoin short liquidations lead the way with $18.7 million in total shorts wiped out, Ether liquidations total $8.2 million.

Crypto market liquidations. Source: Coinglass

Despite the short-seller losing streak, 59.56% of the futures market remains short. With the ratio remaining skewed short, a potential opportunity for a short squeeze could lead to further price upside.

Bitcoin short vs. long ratio. Source: Coinglass

Sentiment and trading volumes spike

The positive sentiment in the crypto market is rippling throughout the ecosystem. Bitcoin and altcoin market trading volume reached $60.8 billion on Jan. 10, the second highest daily volume in three months — behind Jan. 2’s $64.2 billion.

Total crypto market trading volume. Source: Newhedge

By midday of the first day of spot Bitcoin ETFs trading in the U.S., a total of $2.3 billion had been traded across all newly launched products. The large amount of trading broke a first-day record previously set by the ProShares Bitcoin Strategy ETF, which tracks Bitcoin futures contracts.

Related: Bitcoin traders weather US CPI miss as ETH price tags 20-month high

There is optimism surrounding the newly launched spot Bitcoin ETFs, and the increase in volume is leading to an improvement in sentiment, reflected by the Bitcoin Fear & Greed Index, which now shows “extreme greed,” hitting a monthly high.

Bitcoin Fear & Greed Index. Source: Alternative.me

While Bitcoin and altcoins still have overhanging risk events that could impact the price, the increasing institutional interest, potential spot Ether ETF and improved trading volumes are strong indications the bull market has arrived.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.