Cryptocurrencies rebounded strongly on Wednesday, with altcoins leading the market-wide rally. Since its release on December 25, the Shiba Inu-themed coin BONK has returned 3700% to investors, with a 215% increase just in the last day.
Airdropping the token to Solana NFT (non-fungible token) communities and creators quickly generated interest in it and increased trading volumes. Data from Coinmarketcap shows that in the past day, BONK’s trade volume has increased by around 1900%.
In the meantime, the demand for SOL tokens has probably been influenced by the viral buzz. The Solana network’s native coin SOL has gained 16% over the past day, recouping losses from a sharp dip last week.
Alternative cryptocurrencies (altcoins) such as Ethereum Classic, NEAR, and Lido DAO led the way higher, all up over 20% over the past 24 hours. While alternative cryptocurrencies saw prices spike higher on Wednesday, a few altcoin tokens stood out. One such is XYO is up 43% in the last 24 hours and has delivered gains of 170% to traders since the past week.
The rally in Altcoins, which typically outperform Bitcoin in a rising market, suggests an increased appetite for risk among traders.
Onchain analytics firm, Santiment notes that Altcoin has heated up with Ethereum trading at a 3-week high as whales’ interest return, ‘’As altcoins have heated up, Ethereum quietly rebounded back above $1,260 for the 1st time in 3 weeks. Though not quite at the level of the big whale dip buys on December 16th (ETH’s local price bottom), whales are showing increased interest again’’.
The rise in most altcoins according to Santiment might have been buoyed by a ‘’short squeeze’’, as most traders aggressively shorted altcoins.
Santiment tweeted earlier in the week, ’’Traders are aggressively shorting altcoins today, and some assets could be primed for short liquidations. Based on extreme bets being placed on prices going down, DGB, HBAR, HT, KAVA, KSM, SOL, & ZEC would be candidates for small breakouts if altcoins get any momentum”.
Likewise, Traders are putting out bullish trades before the next FED meeting fear starts kicking in towards the end of January. The Fed’s next meeting comes up on Jan 31-February 1. Market speculators might take bullish trades for several reasons at the beginning of January 2023.
According to the onchain analytics firm, the market has been stuck in a range for 51 days. However, a breakout looks likely with the US stock market positioned to move upward.
Additionally, the VIX chart indicates volatility may start picking up again soon. Furthermore, the DXY chart looks like it’s ready to take another leg down.
If the US stock market benefits from a relief rally at the beginning of January, it might boost crypto traders’ sentiment. Moreover, we might see a slight rally while the BTC Dominance chart pulls back, allowing large-cap altcoins to breathe.
However, despite the rally on Wednesday, the mood in the crypto market remained cautious. The Crypto Fear and Greed index, a gauge of market sentiment based on several metrics, was at 29 and reflecting ” fear”.
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