Why Bitcoin, Ethereum, and Solana Popped on Saturday

What happened

Weekends have been good for the cryptocurrency market recently, and today is no different. After a pop in values last Saturday, the move has been repeated this weekend, with green across the market.

As of 9:00 a.m. ET, Bitcoin (BTC 0.46%) has jumped as much as 8.6% in the last 24 hours, Ethereum (ETH -1.98%) gained 5.9%, and Solana (SOL -3.45%) was up 19%. Those moves have trailed off slightly, and the tokens are now up 5.5%, 2%, and 6.9%, respectively, in the last day.

So what

The macro driver of the crypto move is clearly the economic and monetary backdrop. Recent data has shown inflation pressures easing, and there is speculation the Federal Reserve will slow interest rate increases in the next few months. Earnings season has begun also, and results have been strong for the banking industry. That’s causing investors to flood back into higher-risk assets, like crypto.

We did get the long-anticipated bankruptcy of crypto firm Genesis on Thursday night. This is certainly bad from a visibility standpoint for crypto, but it also hasn’t caused much concern within the industry because withdrawals have been locked since November.

The next shoe to drop may be Genesis’ parent company, Digital Currency Group (DCG), which has run into its own funding issues related to illiquid assets and losses from FTX and Three Arrows Capital going bankrupt.

Investors like certainty, and while Genesis’ bankruptcy isn’t good for the industry, it does bring more clarity to the situation. We are also seeing fewer knock-on effects from these businesses going bankrupt. You may remember that Three Arrows Capital went bankrupt this past summer, and it took months for that to lead to FTX’s collapse and the resulting plunge in Solana’s value.

Genesis and DCG going bankrupt or becoming a fraction of themselves is likely priced into the market and doesn’t seem to have the same downstream effects on other businesses.

While all this has been going on, Solana, in particular, has held up extremely well. The blockchain has actually gotten faster and more reliable, thanks to recent upgrades, and both developers and users seem to be staying on the blockchain rather than leaving for alternatives.

Now what

The recent trading momentum is welcome news for crypto holders, but it may not last. Short moves are often driven by momentum and short squeezes, including the liquidation of $385 million of short positions in the last 24 hours.

What I’m encouraged by is the level of blockchain activity on Ethereum and Solana in particular. Developers continue to build for the blockchain, and non-fungible token projects on both blockchains have captured the market’s attention, including Checks on Ethereum and Claynosaurs on Solana. 

As long as developers and entrepreneurs keep building, these tokens will have increasing value in the world. But progress will be lumpy, just like the price of cryptocurrencies. I’m bullish on the future but fully aware that volatility can easily turn the market lower at a moment’s notice.