27 Sep 2022 · 6 min read

Why Crypto Prices Are Pumping Higher Today While Macro Outlook Darkens

The cryptocurrency market has risen by 4.5% in the past 24 hours, with its total cap reaching $1.012 trillion. This rally ends a largely negative seven days for the market, which fell as low as $939 billion last Thursday, meaning that the present level represents a 7.5% recovery in prices.

For the most part, bitcoin has been responsible for today's uplift, with the original cryptocurrency rising by 7.5% at one point in relation to its 24-hour low. On top of this, a number of major altcoins – most notably Terra Luna Classic (LUNC), Terra (LUNA), and Uniswap (UNI) – have posted above-average gains, helping to push the market's overall cap higher.

At a time when stock markets continue to fall amid the negative macroeconomic outlook, the jump in cryptocurrency prices may superficially seem like a mystery. However, given that many coins have likely fallen as far as they reasonably can (without some kind of cataclysmic market or economic event), it's arguable that the best coins now have nowhere to go really but up.

Why Crypto Prices Are Pumping Higher Today

Looking at BTC's rally beyond $20,000, this was driven largely by an increase in spot volumes, with traders and investors likely moving to acquire the original cryptocurrency on the cheap. And as is generally the case with the cryptocurrency market, when bitcoin posts a big movement, this acts as a signal to much of the rest of the market as well.

Indeed, of the top 100 cryptocurrencies by market cap (excluding stablecoins), only 14 are in the red in the past 24 hours:

  • Algorand (ALGO) - down by 2.2%
  • Stellar (XLM) - down by 2%
  • Chain (XCN) - down by 1.9%
  • Bitcoin SV (BSV) - down by 1.8%
  • Compound (COMP) - down by 1.8%
  • Osmosis (OSMO) - down by 1.4%
  • Evmos (EVMOS) - down by 1.1%
  • Cosmos Hub (ATOM) - down by 1.1%
  • Radix (XRD) - down by 0.9%
  • Pax Gold (PAXG) - down by 0.8%
  • Ripple (XRP) - down by 0.7%
  • Helium (HNT) - down by 0.4%
  • ApeCoin (APE) - down by 0.3%
  • DeFi Chain (DFI) - down by 0.1%

These are hardly major falls, and with such coins as LUNC and LUNA up by 41% and 16% (respectively) in the past 24 hours, the market as a whole has enjoyed an increase in its value.

It's arguable that the main reason for crypto prices pumping today is that they were simply due a rebound sooner or later. Looking solely at the technical indicators for many of the major coins, their relative strength indices had been too low for too long, signaling that they were oversold and needed a positive correction upwards.

This is born out by bitcoin's price chart, for example. Here, we see that its RSI (in purple) had been close to 30 for much of late August, and, bar a brief jump in early September, had remained around 40 or just under.

What this tells us is that traders had grossly underappreciated bitcoin relative to its recent price action and that there was value to be gained in buying it up at such a discounted price. Indeed, more than a few analysts have gone on record as saying the market is "oversold on all fronts" and that it was due a "reversal."

From a purely technical, chartist perspective, bitcoin's recent lift also coincided with a bullish divergence, which is when prices fall to a new low while an oscillator (such as the RSI) fails to reach a new low. Put more simply, bitcoin fell yesterday to a low of around $18,700, yet its RSI began rising, a sign of incoming bullish momentum.

This bullish divergence was confirmed, at least for now, by today's earlier movement. And just as BTC has been grossly undervalued as of late, so have most major coins with good fundamentals, from Ethereum (ETH) and Solana (SOL) to Polkadot (DOT) and Uniswap (UNI).

As such, crypto prices pumping higher today can be seen as a correction to excessive pessimism.

LUNC, LUNA, UNI and Other Special Cases

Some altcoins posted well-above average gains in the past 24 hours, with LUNC, LUNA, and UNI leading the pack, at least until a few hours ago.

Terra Luna Classic (LUNC) had recorded a 72% jump between a low of $0.00018478 yesterday and a high of $0.00031905 today, only for it to fall back down to $0.00027565 not so long ago. 

Similarly, Terra (LUNA) recorded a slightly less impressive 36.6% gain between yesterday's low of $2.05 and today's high of $2.80 before dropping to $2.57, which means it has now actually fallen by 3% in the past 24 hours.

Despite such drops, UniSwap (UNI) is currently recording a 15% gain over the past 24 hours, at $6.58. This is a 20% appreciation in a week and an 8% rise in the last 30 days.

All three of these coins have their own specific reasons for beating the market so comfortably. In the case of LUNA and LUNC, each of these coins benefitted from Binance's announcement yesterday that it would be burning all transaction fees taken from trades involving LUNC.

In UNI's case, its rally appears to have coincided with a demo of Uniswap running on the Internet Computer, providing it with a fully decentralized frontend (in contrast to having its website running on a centralized domain server such as Cloudflare or AWS). It's not clear whether this is responsible for the bulk of UNI's gains today, given that this is only a demo, but the prospect of a fully decentralized Uniswap is certainly bullish for the DEX. 

Other big movers include Ethereum Name Service (ENS) and NEO (NEO), which each have their own particular reasons for outrunning the market. Ethereum Name Service partnered with Coinbase in the past week on web3 usernames for the exchange's users, while NEO announced a new community outreach team that will proactively promote awareness and use of its network.

That said, these are relatively modest reasons for rallying and don't fully explain why such coins have posted big rises today. Instead, it needs to be repeated that most of these coins are making up for being so strongly undervalued and oversold.

This is particularly the case with LUNC and LUNA, at least in the sense of these coins seemingly being all but dead only a few months ago. With Binance's announcement yesterday, the market realized these two alts still have some life in them yet, and that they may have written them off too soon.

Much the same applies UNI, ENS, and NEO, all of which have fallen faster than the market average in recent months (e.g., NEO registered an 84.5% drop from its November 2021 high on Monday). So it makes sense that they recover a little by enjoying above-average gains, given how cheap they are.

The Future

When considering the question of how crypto prices can pump in the context of falling stock markets and the negative macro outlook, it's important to remember the role the cryptocurrency market has historically played within the wider global economy.

That is, because of its highly speculative and volatile nature, crypto has often served as a bellwether for (tech) stocks, undergoing movements that will be repeated later on by more traditional markets. Indeed, BTC's rise to its current ATH of $69,044 in November 2021 presaged the S&P 500 and Dow Jones hitting their own records in January 2022.

Likewise, cryptocurrency prices began falling before stocks, with BTC seeing a 50% climbdown from its November record as quickly as January 23. By this point, the S&P 500 was 'only' 8% down from its record.

The point here is that crypto moves before the stock market. For this reason, it's tempting to assert that today's positive data signals the first beginnings of a turnaround in not only cryptocurrency prices but also stock prices and the wider global economy.

Of course, with so many things remaining uncertain, today's good news may be short-lived. But with indicators remaining at bottoms for so long, it must surely be only a matter of time before the market witnesses sustained growth,