The total market capitalization of cryptocurrencies rose above $1 trillion on Wednesday morning for the first time since November 8.
This latest rally in crypto has been led by bitcoin (BTC-USD), which briefly spiked to as high as $21,501 as of 9:15 a.m. ET. Bitcoin is up more than 20% from where it traded just one week ago and has gained roughly 30% so far this year.
Shortly after hitting his milestone, crypto prices dropped along with broader markets. Near 12:20 p.m. ET, bitcoin was trading closer to $21,000.
Crypto prices plummeted in early November as FTX collapsed into bankruptcy in just a matter of days, with the industry's total market capitalization falling to its most recent low of $796 billion on November 9. Since this date, the total market capitalization for cryptocurrencies has risen by more than 20%. Still, the overall market is about 50% lower than where it stood a year ago.
The second largest cryptocurrency, ether (ETH-USD), is up about 23% over the last month against a 28% gain for bitcoin. Ether was changing hands just below $1,600 per coin at its highs on Wednesday morning.
"Bitcoin and Ether’s momentum are still being driven by the global macro, and the diminishing threat of inflation coupled with the prospects of increased debt and currency debasement," Michael Safai, a managing director and co-founder of crypto prop trading firm Dexterity Capital, said over email.
Additionally, the liquidation of bitcoin short sellers has been a big part of the latest move higher.
Covering the period beginning just before last Thursday's inflation report, more than $893 million worth of short positions on bitcoin have been liquidated over the last 7 days, according to crypto derivatives aggregator CoinGlass. As a net of long positions liquidated over the same period, $455 million worth of short positions have been squeezed out of the market over that period.
Bitcoin has also "astronomically" surpassed its 50-day moving average, a key technical level that suggests the asset is reaching "extreme overbought levels," Bespoke Investment Group noted last Friday.
For nearly all other assets, overbought readings typically mean buying power has nearly been exhausted. Bitcoin's rallies are often heavily momentum driven. "It is a bit odd," Jake Gordon, a research analyst with Bespoke Investment Group, told Yahoo Finance of this latest rally in bitcoin. "We’ve seen [trading] volumes begin to start to pick back up too."
However, Safai also noted the crypto market still carries "an undercurrent of anxiety" with investors worrying FTX may not be the last shoe to drop.
A Wednesday letter to shareholders of Digital Currency Group (DCG) seen by Yahoo Finance showed the major crypto portfolio company plans to cut its dividend.
Some shareholders aren't surprised given DCG is attempting to raise funds for its distressed subsidiary, Genesis, which paused lending withdrawals on November 16. Still, investors appear to be losing some patience with the crypto behemoth.
"Perhaps instead of suspending the dividend, DCG should first explore suspending the executive chef and other perks at the expansive headquarters," a DCG shareholder told Yahoo Finance, admitting they were surprised the suspension wasn't announced sooner given the circumstances.
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