- A crypto market rally is happening today as traders embrace a risk-on sentiment.
- President Xi Jinping is considering helping Trump on reopening the Srait of Hormuz.
- The US Senate Banking Committee voted to advance the CLARITY Act.
A crypto rally is underway today, with Bitcoin price retesting the crucial resistance level at $82,000 for the first time in days. Hyperliquid (HYPE) token jumped by over 10% in the last 24 hours, while other gainers were Immutable (IMX), Canton (CC), Quant (QNT), and Ethena (ENA). The market capitalization of all cryptocurrencies soared to $2.7 trillion.
Crypto Rally Triggered by Risk-On Sentiment
The ongoing crypto market rally has been triggered by the ongoing risk-on sentiment in the financial market. It coincided with the ongoing surge in the stock market, with the Dow Jones, Nasdaq 100, and S&P 500 indices soaring to record highs.
The rally also coincided with the sharp decline in crude oil prices. Brent and the West Texas Intermediate (WTI) dropped to $105 and $101, respectively.
This happened after President Donald Trump announced that China’s Xi Jinping offered to help him reopen the Strait of Hormuz. Still, it is unclear whether this will help as China is also a close ally of Iran.
The crypto market is also rallying as it plays catch-up to the booming stock market, which has added trillions in value in the past few months amid the ongoing AI boom. Some traders believe that Bitcoin and most altcoins will ultimately gain momentum in the coming months.
Bitcoin and altcoins are also soaring after the Senate Banking Committee voted to advance the long-delayed CLARITY Act. This bill, which now moves to the full Senate, will simplify how the industry is regulated by giving most of the roles to the CFTC. In a note, Jason Rindahi of Nebula DeFi said:
“The CLARITY Act’s progress is a breakthrough for crypto market structure, particularly in finally distinguishing between passive yield and activity-based rewards, giving the industry its first workable framework at the intersection of banking, securities, and crypto.”
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Cryptocurrencies Face Some Major Risks
Still, the ongoing crypto rally faces some major risks ahead. First, there is a risk that investors will sell the CLARITY Act news. It is common for an asset to jump after a major news break and then pull back after it happens.
Second, Bitcoin has failed to move above the key resistance level at $83,000 and has formed a rising wedge pattern. That is a sign that it may reverse soon as ETF outflows rise. If this happens, the broader crypto market will also retreat since Bitcoin normally sets the tone in the industry.
Additionally, there are macro risks, including the elevated energy prices and inflation. Data released by the Bureau of Labor Statistics (BLS) showed that the headline Consumer Price Index (CPI) and Producer Price Index (PPI) rose to 3.8% and 6.0%, respectively. This increase means that the Fed will find it difficult to cut interest rates this year.
At the same time, there is a risk that the US and Iran will resume fighting, which will push inflation much higher. In a statement this week, he maintained that the ceasefire with Iran was on life support. Some of his closest advisors like Mark Levin and Lindsey Graham, are recommending more fighting to reopen the Strait and take the enriched uranium.
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