The cryptocurrency market staged a remarkable rebound as rising expectations of US interest rate cuts and renewed spot Bitcoin ETF activity captured the attention of investors. Vanguard’s decision to reverse its longstanding ban on Bitcoin ETF purchases fueled enthusiasm and triggered a rally across digital assets, marking a significant turnaround from the recent volatility.
The Crypto Comeback
Tuesday’s trading session saw Bitcoin recover strongly, climbing back above $91,000 with an impressive 8% gain in just 24 hours. Ethereum (Ether) followed suit, soaring 10% to surpass the $3,000 mark. Other altcoins also joined the rally, with Cardano (ADA) surging 14.58% to $0.43, Solana (SOL) jumping 12.03% to $139.53, and XRP advancing 8.73% to $2.17. Even Dogecoin (DOGE) posted a notable 10.05% gain, trading at $0.1464.
The total cryptocurrency market capitalization rose to $3.06 trillion, recovering from its dip below $3 trillion during a brief risk-off sentiment the previous weekend. According to Coinglass, Bitcoin’s rally led to $157 million in short liquidations, while over $312 million was cleared across all crypto derivatives, highlighting the significant market activity.
Vanguard’s Impact on Bitcoin ETF Activity
The resurgence in Bitcoin’s price has been closely tied to the reopening of the spot ETF market for Vanguard customers. Bloomberg Intelligence analyst Eric Balchunas aptly dubbed this phenomenon ‘The Vanguard Effect,’ noting that Bitcoin surged as US markets opened for trading. During the first 30 minutes of trading, Vanguard’s BlackRock IBIT product reported $1 billion in trading volume, demonstrating heightened demand among conservative investors.
‘Bitcoin jumps 6% right around the US open on the first day after the ban lifted. Coincidence? I think not,’ said Balchunas on X, further pointing out that the rally aligns seamlessly with ETF policy shifts.
Institutional Shifts in Crypto Adoption
In another major industry development, Bank of America informed its financial advisers across its Merrill, Private Bank, and Merrill Edge divisions that clients can now allocate 1% to 4% of their portfolios to cryptocurrency. This change marks a pivotal moment, as it removes a restriction previously preventing over 15,000 advisers from actively recommending digital asset investments to clients.
The increased accessibility to ETFs and the adoption of crypto-friendly policies by major financial organizations reflect a broader shift in wealth management. Investors are now more inclined to explore the growing potential of digital assets, further bolstering confidence in the sector.
Short-Term Outlook for the Crypto Market
Despite the initial turbulences in December, renewed optimism about Federal Reserve policy, combined with increased accessibility to crypto ETFs, has reinvigorated the market. Traders are assigning high probabilities to a rate cut in December, which could drive further demand for speculative assets like cryptocurrencies.
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As the market continues to stabilize, both fundamental and structural drivers are helping regain momentum, signaling a potential shift towards steady growth in the digital asset space.
