Market sentiment is currently in the “greed” zone, prompting many traders to buy in and push Cryptocurrency prices higher.
Liquidation of short positions has been dominant in recent trading sessions, signaling strong bullish momentum.
Over the past 24 hours, the Cryptocurrency market has seen a significant drop in trading volume, down more than 30%.
However, despite the decline, the total market capitalization still increased slightly. So, why are Cryptocurrency prices increasing despite the decrease in trading volume?
Positive Market Sentiment Boosts Cryptocurrency Prices
Positive market sentiment is one of the main reasons why Cryptocurrency prices are trending up. According to data from Coinglass, market sentiment remains bullish.
The “Fear and Greed” Index, a popular gauge of investor sentiment, is currently reading “greed.”
Source: Coinglass
This high level of greed often signals increased buying activity, as many traders are driven by FOMO (fear of missing out).
This may answer the question of why Cryptocurrency prices are rising today, as FOMO leads to more buying, pushing prices higher.
When the Fear and Greed Index points to greed, it usually indicates that traders are piling into the market. This creates buying pressure, pushing the prices of key assets higher.
However, it is important to note that market corrections often follow this rally, as FOMO can quickly turn into FUD (fear, uncertainty and doubt), causing volatility in the markets.
Bitcoin Price Surge Supports Market Growth
Another important factor explaining why Cryptocurrency prices are rising is the positive price movement of Bitcoin, the largest Cryptocurrency by market capitalization.
Over the past few days, Bitcoin has broken through the $63,000 resistance level and continued to climb, maintaining the price above $68,000.
In the most recent trading session, Bitcoin even reached $69,000, contributing to the overall market capitalization increase.
Bitcoin's price stability above key resistance levels provides a solid foundation for the entire Cryptocurrency market, as its performance often sets the tone for other assets.
With Bitcoin maintaining its uptrend, other Cryptocurrencies followed suit, pushing the market further up.
Short liquidation pushes prices higher
An analysis of the Cryptocurrency liquidation chart reveals another reason why Cryptocurrency prices are rising. There has been a significant increase in short position liquidations in the last few days.
On October 8, liquidations of short positions amounted to about $71 million, while liquidations of long positions were just $41 million.
In the next trading session, both short and long liquidations were almost equal, at around $28 million.
However, in the most recent session, liquidations of short positions spiked to nearly $80 million, compared to just $38 million in long liquidations.
Source: Coinglass
This increasing trend of short liquidations signals that traders betting on the downside are being forced to close their positions as prices continue to rise.
As short positions close, buying pressure increases, leading to further price increases, making the market even more bullish.
Why are Cryptocurrency prices rising?
The upward movement of the Cryptocurrency market can be attributed to a number of factors, including the positive market sentiment reflected in the Fear and Greed Index, Bitcoin's strong price performance, and the liquidation of short positions.
Together, these factors are pushing the market higher, despite falling trading volumes.
Although the current trend is positive, traders should be aware that rapid price increases can lead to market corrections soon.
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