- Ethereum and other cryptocurrencies have surged in 2023.
- ETH short liquidations surged to the highest point in months.
- There are hopes that the Federal Reserve will pivot.
Ethereum has had a strong comeback in 2023 after crashing below $1,000 last year. It soared to a multi-month high of $1,615, about 36% above the lowest level this year. This means that it has outperformed popular assets like the Nasdaq 100, Tesla, and Dow Jones. Here are a few reasons why Ethereum price has surged.
Ethereum short liquidations
The first main reason why ETH/USD has surged is short liquidations. A short is a trade placed to bet against a financial asset. Short-sellers benefit when the price drops. In the past few months, Ethereum shorts have been rising as concerns about the crypto industry remain.
Therefore, a likely reason why Ethereum price rallied is that many short-sellers decided to liquidate their positions. As such, the initial rally was part of a short squeeze. There is data to confirm this view.
Data compiled by CoinGlass showed that short liquidations rose to the highest point in months. The chart also shows that bullish liquidations were soaring as Ethereum was crashing.
Fed pivot
The other reason why Ethereum price has rocketed higher is macro in nature. Recent economic data have sent mixed signals about the economy. The unemployment rate dropped to 3.5% in December while wage inflation edged lower to 4.7%.
At the same time, consumer price index (CPI) dropped to 6.5% in December from its peak of 9% in June. Core inflation dropped to 5.7%. The Producer Price Index (PPI) also declined in December. Further data showed that the country’s retail sales edged downwards.
Corporate earnings have also warned about the American economy. Major banking groups like Goldman Sachs and JP Morgan published weak results. As a result, Goldman Sachs laid off over 3,200 people.
On Friday, Alphabet said that it will lay off 12,000 people. Other companies like Netflix, Salesforce, and Meta Platforms have announced layoffs. Bankers have warned about a mild recession. Therefore, Ethereum price has risen as investors predict that the Fed will pivot.
Find out how to buy Ethereum.
FTX reboot hopes
Finally, Ethereum price has soared because of the rising hopes that FTX will be rebooted. The current CEO has already identified over $5 billion in liquid assets. If the crypto rebound continues, this could mean that the company will be able to fill the gap between assets and liabilities.
In his first interview this week, John Ray said that his team was working to restart the company. If this happens, it would be a good sign for cryptocurrencies like Bitcoin and Ether.
Contributors
