PayPal’s partnership with a cryptocurrency company and growing expectations among bond traders for a November rate cut significantly boosted the cryptocurrency market cap today.
The cryptocurrency market is up today, with total market capitalization up 2.80% over the past 24 hours to $2.18 trillion on May 3. This includes gains for top currencies Bitcoin and Ethereum, which have risen by approximately 2.52% and 1.40% respectively over the same period.
Major catalysts driving the cryptocurrency market higher today included a less hawkish tone from the Federal Reserve and PayPal’s further expansion into the cryptocurrency space through a new partnership.
Bond traders expect first rate cut in November
The Fed made it clear at the end of its two-day Federal Open Market Committee (FOMC) meeting on May 1 that there would be no rate hikes in the near term. As a result, bond traders now expect the first rate cut to come in November, rather than in July at the beginning of 2024.
The correction came during the strongest two-day surge in short-term Treasurys since January. The two-year yield, which is highly sensitive to interest rate changes, has fallen 331 basis points from its weekly high on May 1 to 4.88%.
Meanwhile, the cryptocurrency market has rebounded 7% since May 1, including today’s gains. This suggests a renewed risk-on sentiment among cryptocurrency traders, which has been further encouraged by a drop in the benchmark 10-year U.S. Treasury yield.
Generally speaking, when bond yields, which are seen as the safest investments, fall, investors are more willing to buy riskier assets such as cryptocurrencies and stocks.
PayPal expands its crypto ecosystem
The ongoing recovery in the cryptocurrency market coincided with news that PayPal has partnered with cryptocurrency app MoonPay, which will allow the payments giant to offer transactions in more than 110 cryptocurrencies to its 426 million U.S. customers.
When a major financial player like PayPal enhances its crypto services, it validates the market’s legitimacy in the eyes of more conservative investors and the public at large. As a result, this news is driving gains in today’s cryptocurrency markets as traders and investors anticipate increased demand and adoption.
PayPal previously offered options in Bitcoin, Ethereum, and its own dollar-pegged stablecoin, PYUSD. The company recently announced that PYUSD can be transferred internationally through its Xoom service.
Post-Halving Fractal
The recent gains in the cryptocurrency market, including today’s performance, are part of the typical consolidation trend observed immediately after Bitcoin’s halving.
Based on past patterns, investors and market observers expect a possible surge after the halving in 2024. The launch of spot Bitcoin exchange-traded funds (ETFs) in the United States and Hong Kong further fueled these bullish views.
On May 3, the cryptocurrency market formed a hammer candlestick pattern, which is characterized by the formation of a descending shadow that is more than twice the length of the candle body — indicating a bullish rejection after the halving.
technical analysis
The cryptocurrency market is rising today as various indicators suggest that the market is leaning towards a bullish trend.
For example, the chart below shows the market capitalization rebounding from the lower trendline in what appears to be a bull flag. This bullish continuation pattern will break out when the price breaks above the upper trendline and rises to the height of the previous uptrend.
Due to this technical rule, the next upside target for the cryptocurrency market is around $3 trillion.
The bullish outlook is further strengthened by the market rebound approaching the multi-month ascending trendline support. The fact that the market value has rebounded from this line reinforces the support level, indicating that the long-term bullish trend remains intact.
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