Why is the Crypto Market Up Today?

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Markets for bitcoin and other cryptocurrencies surged ahead of inflation data and a Santa Claus rally, determined by US PCE inflation. Today, the United States Bureau of Economic Analysis is set to unveil the inflation data for November’s consumption expenditures (PCE). 

Macro Factors and Monetary Policy Outlook

As investors await the release of the U.S. personal consumption expenditures (PCE) inflation data for November, the crypto market finds itself at a pivotal juncture.  Anticipating a further cooling of the annual PCE inflation rate to 2.8% from last month’s 3%, investors are keenly eyeing the monthly rate, which is expected to remain steady.

The Core PCE considered the Federal Reserve’s preferred inflation gauge, is projected to rise 0.2% month-on-month, with the annual rate predicted to dip to 3.3%, marking its lowest level since 2021. 

Meanwhile, the market sentiment aligns with recent signals from Fed Chair Jerome Powell, projecting three rate cuts in 2024. The market assigns a 45% chance to the Fed initiating rate cuts in March, with a 71% probability of a 25 bps rate cut, according to CME FedWatch. 

Crypto Rally in the Spirit of Santa Claus

Against this backdrop, Bitcoin and major cryptocurrencies like Ethereum, Solana (SOL), BNB, XRP, Cardano (ADA), and Avalanche (AVAX) are painting a festive picture in the crypto market. The anticipation of a Santa Claus rally is palpable as these digital assets exhibit upward momentum.

Bitcoin, with a 1% increase over the last 24 hours, hovers around $43,780. However, a simultaneous 18% drop in trading volume indicates a cautious market approach. 

As Friday’s options expiry looms, with 25,000 BTC options and 217,000 ETH options set to expire, worth $1.11 billion and $490 million, respectively, the market braces for potential profit booking and associated price fluctuations.