U.S. stocks fell, while the crypto market rose against the trend.
Written by: BitpushNews
On Wednesday, the latest U.S. core PCE price index for October rose 2.8% year-on-year, in line with expectations but still above the Federal Reserve's 2% target. This data further heightened market concerns about persistently high inflation and raised questions about the effectiveness of the Federal Reserve's monetary policy tightening.
Crescat Capital macro strategist Tavi Costa stated that the Federal Reserve is facing a tricky policy dilemma. He warned that the risk of a second wave of inflation seems to be brewing. If this occurs, the Federal Reserve will face a tough choice: further rate hikes could exacerbate the government debt burden, while slowing the rate of hikes could lead to runaway inflation.
U.S. stocks fell in response, while the crypto market rose against the trend.
In the face of inflationary pressures and uncertainty over Federal Reserve policies, traditional financial markets remained cautious. The three major U.S. stock indexes all fell. By the close, the S&P 500, Dow Jones, and Nasdaq indexes fell by 0.42%, 0.30%, and 0.66%, respectively.
However, the crypto market has shown strong resilience. Bitcoin's price surged significantly on Wednesday, breaking the $97,000 mark, while Ethereum rose by over 10%, reaching a new high in several months. Ethereum (ETH) rose by 10%, peaking at $3,687.01 during the day, the highest since June.
Tokens ranked in the top 200 by market capitalization saw a broad increase. Among them, Kadena (KDA) led the gains with a rise of 25.3%; followed by Uniswap (UNI) with a rise of 23.7%; and PancakeSwap (CAKE) with a rise of 22%.
The current total market capitalization of cryptocurrencies is $3.34 trillion, with Bitcoin's market share at 57.1%.
Capital rotation, is the altcoin season coming?
Coinglass data shows that Ethereum ETFs recorded positive fund inflows for three consecutive days, with a net inflow of $40.6 million on Tuesday. This trend sharply contrasts with the continued net outflows of Bitcoin ETFs. QCP Capital analysts point out that the market is shifting funds from Bitcoin to Ethereum and altcoins. This phenomenon is closely related to investors' expectations for the altcoin season, as well as the development of Ethereum's ecosystem and the strong performance of its derivatives market.
Analysts say: 'After Bitcoin's decline, Ethereum is making a comeback, with signs that the market is shifting funds towards ETH and altcoins.' Since plunging to a low of $0.3204 on November 21, the ETH/BTC ratio (which measures ETH's performance relative to BTC) has surged by over 15%.
The rise of ETH is accompanied by strong bullish sentiment in its derivatives market. According to data from Coinglass, ETH open interest (OI) reached a historical high of 6.55 million ETH on Wednesday, worth $23.34 billion, continuing the upward momentum of the past two weeks. Additionally, data from Velo shows that the three-month premium of ETH on cryptocurrency exchanges Binance, OKX, and Deribit has surged to 16%.
Although the market is generally optimistic about the arrival of the altcoin season, CryptoQuant founder and CEO Ki Young Ju believes that the altcoin season may be delayed due to a lack of new retail capital. Ki Young Ju stated: 'For altcoins to reach historical new high market caps, a significant inflow of new capital into cryptocurrency exchanges is needed. The altcoin market cap being below previous historical highs indicates a decrease in liquidity from new exchange users.'
The analyst concluded that altcoins should focus on developing independent strategies to attract new capital, rather than relying on Bitcoin's momentum, but he still remains 'optimistic' about altcoins.
