Another weekend crypto surge drives Bitcoin, Ethereum, and Solana higher

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What happened

The crypto rally we saw to start 2023 appears to have significant momentum. As it happens, weekend rallies propelled much of the movement in major cryptocurrencies to start the year, with Bitcoin (CRYPTO:BTC), Ethereum (CRYPTO:ETH) and Solana (CRYPTO:SOL ) seeing moves from 2021 to start the year. As of 4 p.m. ET, these three major tokens jumped 3.2%, 4.5%, and 9.3%, respectively, in 24 hours.

Macroeconomic conditions remain broadly bullish for risky assets, prompting strong investor interest in higher risk assets such as cryptos. Core and aggregate PCE prices rose at the slowest pace since 2021 and the Bank of Canada raised rates only 25 basis points (0.25%), signaling a pause on the horizon. These catalysts provided indications that a pause and pivot scenario could be in play for the Federal Reserve this year. For high-risk assets like crypto, this is a big deal.

At the token-specific level, these three mega-cap cryptos have their own catalysts that investors are watching closely right now. Bitcoin’s strong momentum this month has seen significant moves across various altcoins, with the token set for its best January in a decade, moving around 50% from the year’s low. last. Ethereum’s upcoming Shanghai upgrade has led to a record amount of ETH being staked on the network, boosting demand for its tokens as investors seek passive income potential from the world’s second-largest crypto . And plenty of discussion around Solana is brewing, with the leading “Ethereum killer” seeing increased interest due to much improved network performance and a lack of downtime seen in recent weeks.

So what

Crypto investors have a lot to unpack with these moves. On the one hand, one could argue that these speculative assets may have sold off too quickly last year as the market undervalued the likelihood that monetary policy tightening would be short-lived (as it now appears this is the case). On the other hand, many crypto skeptics are indicating that this rally is likely unsustainable, given the likelihood that a Fed pause will be in place for longer than many anticipate.

We will have to see what happens on the macro level. It’s almost impossible to predict. However, one thing that caught my eye this year is the extent to which bullish catalysts are now embedded in the valuations of key cryptos. Institutional investors now seem to have the green light to buy crypto on good news, and are doing so in droves.

Now what

A few weeks of bullish momentum does not necessarily imply that a multi-year bullish rally is underway. While many crypto investors may note that this risky rally looks a lot like the post-pandemic surge we experienced just a few years ago, it’s probably too early to declare this crypto winter over. Many of the headwinds that contributed to the negative macroeconomic backdrop seen in 2022 remain.

That said, the sample size with this recent crypto rally may be enough to suggest that momentum can be sustained over the medium term. Additionally, Bitcoin, Ethereum, and Solana are among the top digital assets with institutional demand. So if capital really starts to flow massively into this sector, it’s a rally that could have legs, at least for the next few months.

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Chris MacDonald holds positions at Ethereum and Solana. The Motley Fool has positions and recommends Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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