A Nansen analyst shared insights into the recent crypto market rally that wiped out almost $300 million in short positions, contributing to a signficant price recovery.
As previously reported on May 21, the overall cryptocurrency market cap increased by hundreds of billions in hours. This rapid ascent was preceded by increased Bitcoin (BTC) demand, as 11 U.S. spot BTC ETFs saw over $950 million in outflows.
According to the Nansen analyst, the approval of spot Ethereum (ETH) ETFs was a key factor, unexpectedly boosting market sentiment.
“The ETH ETF approval was completely priced out, and surprised markets positively”, the analyst explained.
Several issuers have updated their 19b-4 filings, which propose rule changes. Reports also indicate that the U.S. SEC engaged providers on securities registration statements via S-1s following initial approvals. Despite this progress, the process may be gradual.
Yep, a lot of variables here, not least is the politics, but this will take some time. https://t.co/8NMAjDKsMR
— Scott Johnsson (@SGJohnsson) May 22, 2024
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Beyond on-chain performance and Wall Street crypto adoption, the analyst highlighted improved macroeconomic conditions. Short-term U.S. rates reportedly declined by 40 basis points in 30 days as the Federal Reserves moved to tame inflation.
Furthermore, Nansen’s risk management indicators switched to “risk-on” sometime between May 18 and May 19, signaling inbound higher token levels. “For now, it looks like we are riding an upward leg in crypto prices”, said the analyst.
At press time, market prices had steadied after a two-day blitz that took BTC above $70,000 and ETH north of $3,700. The total crypto market cap hovered around $2.7 trillion while trading volumes had halved compared to the previous day per CoinGecko.
Crypto market overview | Source: CoinGecko
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