Why is the crypto market up today?

The crypto market is up today, with Bitcoin (BTC), Ether (ETH), XRP (XRP), Cardano’s ADA (ADA) and numerous altcoins rallying to start the month of October. Crypto and equities markets responded positively to the United States’ temporary aversion to a government shutdown, bringing the total crypto market cap up $3.7 billion to $1.1 trillion on Oct. 2.

Let’s examine three of the major factors influencing today’s crypto market rally.

Uptober is off to a solid start

October has historically been celebrated as “Uptober” due to the positive returns in the crypto market. Bitcoin and crypto market prices rallied 5% to over $28,500.

The seasonality of Bitcoin’s returns in October has remained positive, only failing to achieve gains three times in the past. With such a strong history, October is statistically one of the best months for Bitcoin price gains.

A strong October is much needed after the third quarter of 2023 saw $700 million in losses resulting from a variety of hacks.

Related: Are DAOs overhyped and unworkable? Lessons from the front lines

Crypto liquidations rule the day

The crypto market rally started on Oct. 1 and fueled a wave of short position liquidations across the market, totaling over $92 million in 24 hours. Bitcoin short liquidations led the way, with the largest single liquidation of $8.39 million in one transaction on the Huobi exchange. In total, $51.5 million in Bitcoin shorts were liquidated in 24 hours.

Despite the short-seller losing streak, 50.5% of the futures market remains short. With the ratio still skewed short, a potential opportunity for a short squeeze could happen and lead to further price upside.

Macro factors could benefit the crypto market

The U.S. government averting a shutdown on Sept. 30 may have helped the initial Oct. 1 crypto price pump, which quickly wiped out $70 million in shorts.

Despite the Securities and Exchange Commission refusing to approve a Bitcoin exchange-traded fund (ETF) and its continued war on the crypto market, large institutions remain interested in the space.

Related: BTC price knocks on $28.5K as trader says Bitcoin ‘reeks of disbelief’

Such interest led VanEck and Bitwise to both launch Ether ETFs on Oct. 2. The Bitwise ETF will launch on the Chicago Mercantile Exchange, while the VankEck Ether ETF will launch on the Chicago Board Options Exchange.

While Bitcoin and altcoins still have overhanging risk events that could impact the price, the growing institutional interest is improving sentiment across the market. The Bitcoin Fear & Greed Index highlights the improved sentiment, noting an 11-point increase over the last month.

Overall, crypto markets are likely to continue to experience price volatility. While the positive start to October is providing a nice short-term bump in crypto prices, the market’s reaction to any new enforcement actions or an economic recession will be the true determinant of the direction the market chooses to take.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.