Why Bitcoin, Ethereum and Solana jumped over 10% in the last 24 hours

What happened

The cryptocurrency market suddenly came to life on Friday night for the first time since the FTX collapse in early November. Almost all assets were higher, and some with ties to FTX are significantly higher.

Bitcoin (BTC -3.91%) jumped 10.9% and is trading at $20,909 at 8 a.m. ET, surpassing the $20,000 level for the first time since FTX filed for bankruptcy in early November. Ethereum (ETH -5.05%) is up 10.1% in the last day to $1,540 and Solana (SUN -7.87%) is the big mover, up 36.1% to $22.53. Over the past week, the cryptocurrencies have increased by 23.2%, 21.5% and 69.9% respectively.

So what

Momentum can be a powerful force in cryptocurrencies, especially on weekends. Weekend trading often brings some of the biggest moves, as traders take time off and there is less liquidity (buyers and sellers) in the market.

Fuel some of the moves are the liquidation of short positions. According to coinglass.com, $730 million in short positions have been liquidated in the last 24 hours, with $240 million in Bitcoin, $261 million in Ethereum, and $26.3 million in Solana short trades.

The two macro news this week were inflation data showing a reduction in prices over the past month, leading to speculation that the Federal Reserve will soon stop raising interest rates and may even be forced to cut rates sooner than expected. This pushed growth stocks and high-risk assets higher this week, but the momentum really hit crypto hard Friday night into Saturday morning.

Since FTX got us here, it may partly be FTX that has driven the rally. By that I mean liquidators of FTX’s assets have recovered $5 billion in assets to return to clients, and they have sold leveraged positions as quickly as possible. The increased selling pressure to a market with lower liquidity, and added to the short positions, this can drop prices. But when they lower their sales and short positions are liquidated (as they have today), the bounce higher could be quick.

What now

The price of cryptocurrencies comes fundamentally from supply and demand. Supply is not increasing very quickly, so demand is the key. As FTX collapsed and the crypto winter continued, many investors and traders either gave up on the market or took short positions to take advantage of the weakness. But over time, there should be more and more users of the blockchain, helped lately by significant corporate interest.

I think the long-term trend for cryptocurrencies is still higher, but the volatility seen in the last two months will continue. There must be more use cases that disrupt old businesses or create new businesses, and that’s when mass adoption will come. That’s why Solana is my top cryptocurrency for the long term, given its low cost and high speed. But a rising tide is lifting all boats, and bullishness in crypto in general is helping everything trade higher today.