Article source: BitPush
On Wednesday, the latest U.S. core PCE price index for October rose 2.8% year-on-year, which was in line with expectations but still above the Federal Reserve's 2% target. This data further intensified market concerns about persistently high inflation and raised doubts 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 situation comes true, the Federal Reserve will face a tough choice: further interest rate hikes could exacerbate the burden of government debt, while slowing the pace of rate hikes could lead to runaway inflation.
U.S. stocks fell sharply, while the crypto market rose against the trend.
In the face of inflationary pressures and uncertainty about Federal Reserve policies, traditional financial markets have taken a cautious stance. The three major U.S. stock indices all fell. By the close, the S&P 500, Dow Jones, and Nasdaq indices dropped by 0.42%, 0.30%, and 0.66%, respectively.
However, the crypto market has shown strong resilience. The price of Bitcoin surged significantly on Wednesday, breaking through the $97,000 mark, and Ethereum rose by over 10%, reaching a multi-month high. Ethereum (ETH) rose by 10%, hitting a daily high of $3,687.01, the highest since June.
Tokens ranked in the top 200 by market cap rose broadly. Among them, Kadena (KDA) led with a rise of 25.3%; followed by Uniswap (UNI) with a rise of 23.7%; PancakeSwap (CAKE) rose by 22%.
The overall market capitalization of cryptocurrencies is $3.34 trillion, with Bitcoin's market share at 57.1%.
Is capital rotation indicating the arrival of the altcoin season?
Coinglass data shows that Ethereum ETFs have recorded positive fund inflows for three consecutive days, with a net inflow of as much as $40.6 million on Tuesday. This trend sharply contrasts with the continuous net outflow of Bitcoin ETFs. QCP Capital analysts point out that the market is shifting funds from Bitcoin to Ethereum and altcoins. Behind this phenomenon, in addition to investors' expectations for the altcoin season, is closely related to the ecological development of Ethereum itself and the strong performance of the derivatives market.
Analysts stated, 'After the decline of Bitcoin, Ethereum is making a comeback, with signs that the market is rotating funds towards ETH and altcoins.' Since dropping to a low of $0.3204 on November 21, the ETH/BTC ratio (which measures ETH's performance relative to BTC) has surged over 15%.
The rise of ETH is accompanied by strong bullish sentiment in its derivatives market. According to Coinglass data, ETH open interest (OI) hit a historic high of 6.55 million ETH on Wednesday, valued at $23.34 billion, continuing the growth 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 surged to 16%.
Although the market generally anticipates 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 said, 'For altcoins to reach historical new high market capitalization, a large influx of new capital into cryptocurrency exchanges is needed. The lower market capitalization of altcoins compared to 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.
