As per Coingecko, the market cap of all cryptocurrencies has surpassed the two trillion dollar mark, and investors are starting to feel good vibes again. The last time the entire crypto market cap was at $2 trillion was back in April of 2022.

With the collapse of the Terra/LUNA blockchain, and the bankruptcy of FTX, 2022 was a rough year for cryptocurrencies. Above all, what likely had the most negative impact on the crypto market was the US central bank raising interest rates all the way to ~5% by May of 2023.

Interest rates remain above 5% to this day, so why are the crypto markets rallying?

BTFP

Despite the central bank's tough stance on interest rates and their supposed quantitative tightening (QT), they introduced what could essentially be considered a backdoor bailout program called the Bank Term Funding Program last March, to rescue failing regional banks.

Unlimited Debt Ceiling

Moreover, the US congress lifted the debt ceiling last June, which gave the government a blank check to borrow as much money as they want. In fact, they are currently borrowing over 1 trillion dollars every three months.

While the Fed takes away liquidity via higher interest rates and QT, liquidity is being added via the BTFP and the unlimited debt ceiling.

Faltering Economy

Many market participants have come to realize that the central banks have painted themselves into a corner. Sooner or later they will have to unleash full quantitative easing (money printing) and lower interest rates to rescue the economy and the markets, and that will send crypto prices sky high.

Fading US Dollar

The market has also observed that more nations are dropping the US dollar in favor of Bitcoin, crypto, gold, and other alternative currencies. In fact, Russian president Putin stated in a recent interview with Tucker Carlson that only ~13% of their international trade is done in US dollars now, compared to 80% before 2021. More people are getting out of the dollar via crypto.

ETF Approval

Finally, the Bitcoin ETFs that were finally approved by the SEC last month are likely having a positive effect on the market, as fund inflows continue to increase.

Conclusion

We must remember though, the most important thing in crypto is not that "number go up", but that adoption of cryptocurrencies is actually happening with small business owners and individuals around the world, as those are the people who will pull us into the new crypto-powered economy.

Resources

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