Lower Yields, Higher Risk Appetite: Why Crypto is Booming This Week

The global crypto market cap broke $4.18 trillion on October 3rd, hitting a new historic milestone for crypto while also adding over $118 billion to the market. This development comes as Bitcoin trades near price discovery at $124,000, and Ethereum topped $4,400. Only a few days after it looked like the bull market was all but over, the market’s renewed strength came at the very start of the last quarter of the year.

Nearly all cryptocurrencies are at a profit in the weekly timeframe. Bitcoin is up 11.25% during that period, while BNB stands out as the best-performing altcoin, with a 22% increase in the last seven days. With crypto pumping, we could see Bitcoin having another go at price discovery, all while altcoins continue to build momentum as well. 

Digital assets appear largely unaffected by the government shutdown in the U.S. While at first, many believed that this would cause investors to flee risky markets, crypto's most recent performance this week has moved in the opposite direction. 

The reason for that may lie in macro. U.S. Treasury yields, particularly the short-term yields, are dropping this week. With growing expectations of another interest rate cut by the end of the month, investors are beginning to switch markets in search of volatility. 10-year Treasury yields edged closer to the 4% mark, while 2-year Treasury yields are now at 3.576%.This is extremely bullish for crypto because it thrives in liquidity-rich environments. With looser monetary policy just around the block, crypto's most recent performance shows that the market may already be pricing lower borrowing costs in the future. 

Altcoin Season Warming Up?

The altcoin market capitalization has been trading at a greater profit than Bitcoin since October 1st. Since then, altcoins saw a 7.02% increase, against Bitcoin's 6.45%. While altseason talks have been brewing pretty much the entire year, it is at least worth pointing out that it's unusual for altcoins to outperform Bitcoin at the start of a bull run. 

CoinMarketCap's "Altcoin Season Index", a tool to measure how the top 100 altcoins on the platform are trading against Bitcoin, has been hovering just below the 75 threshold throughout the week, currently at 65. 

Aster, Myx Finance, and Memecore are the best-performing altcoins in the market over the last 90 days. Meanwhile, DoubleZero, Virtual Protocols, and Pi Network stand out as the worst-performing altcoins of the third quarter. 

ETF Inflows and Market Optimism

Bitcoin exchange-traded funds broke a series of consecutive outflow days on September 29. Since then, Bitcoin ETFs registered nearly $1 billion in inflows.

source: SoSoValue 

Meanwhile, Ethereum ETFs saw an even greater performance. Since September 29, ETH ETFS saw over $1.8 billion in inflows, marking one of the greatest weeks in recent times. BlackRock's ETHA carried most of these inflows, bringing in over $1.06 billion over the last five days.

The overwhelmingly good performance of digital assets and crypto ETFs helped flip investors' sentiment. While the market began the week on "fear" levels on CMC's "Fear & Greed Index", no more than 72 hours later, the market is now approaching "greed" levels, showing how quickly momentum can shift when liquidity returns. 

Next week will hold significant developments for financial markets. Fed Chairman will give a public statement on Thursday, while on Friday, NFP data can reinforce even more the idea of lower interest rates. 

On a related note, WEEX is currently rewarding new traders with a 20% Welcome Bonus when joining through this link.