Why is Ethereum Classic surging today?

Is today's surge in these two high-profile cryptocurrencies sustainable?

| More on:
Man on a ladder drawing an increasing line on a chalk board symbolising a rising share price.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

As the world's second-largest cryptocurrency, Ethereum (CRYPTO: ETH) generally dictates the way that many Ethereum-related tokens perform on any given day. Such is the case today, with Ethereum, Ethereum Classic (CRYPTO: ETC), and Lido Staked Ether (CRYPTO: STETH) all surging within a relatively tight band. As of 11:45 a.m. ET on Wednesday, these three tokens had risen 13.3%, 10.3%, and 13.2%, respectively, over the past 24 hours.  

These moves come on the heels of some rather impressive liquidation data for Ethereum. Over the past 24 hours, according to the website Coinglass, Ethereum liquidations surged to more than $575 million. These liquidations were skewed by more than 5 to 1 toward short trades, suggesting leveraged short-sellers are getting hit at a staggering pace. In fact, this pace of short liquidations is the fastest since July of 2021, providing retail investors with a potential short squeeze to jump on today.  

As more bullish sentiment builds in the market around Ethereum and other megacap tokens, staking interest on the Ethereum network could surge. For Lido Staked Ether, this is an obvious catalyst. That's because it's the token that represents the equivalent of a receipt for holders of ETH tokens staked on Lido's liquid staking platform.   

For Ethereum Classic, this network, which is actually a fork of the original Ethereum blockchain, has seen a surge in interest from crypto miners who have switched over to mining ETC to make up for lost revenue previously mining Ether. Accordingly, this blockchain is distinct from Ethereum itself, but appears to be rallying based more on broadly bullish macro conditions today.

So what

The moves Ethereum Classic and Lido Staked Ether have made today generally follow the high correlation of these tokens to Ethereum. As tokens that are generally viewed as proxies on Ethereum itself, Ethereum Classic and Lido Staked Ether have both seen a surge in interest as short positions are replaced by more risk-on trades in today's market.

However, it's important to consider the catalysts that drove this short-liquidation surge in Ethereum today. It appears that expectations that central banks could slow interest-rate hikes have driven most of today's bullish shift. The Bank of Canada announced a slower-than-expected rate hike of 50 basis points (0.5%) today, which hinted at the potential of an eventual central bank pivot. That's an obvious bullish catalyst for crypto investors, who have seen leverage come under pressure as rates rise and capital seeks a safe haven in fixed-income assets.

Now what

The crypto market's surge today, led by Ethereum, Ethereum Classic, and Lido Staked Ether, is one that many crypto investors have been longing for. It's been a tough year, to say the least, for most crypto investors, with the overall market still down roughly two-thirds from its peak in late-2021. 

Accordingly, whether the rally we've seen over the past few days can be sustained is the real question. For now, there's a lot to like about the momentum we're seeing with the upside among these three tokens.

But we've also seen downside volatility overwhelm bulls this year more often than not. Accordingly, investors looking to time the bottom might want to wait for more-conclusive data before jumping in with two feet.      

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Chris MacDonald has positions in Ethereum. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Ethereum. The Motley Fool Australia owns and has recommended Ethereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.            

More on International Stock News

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
International Stock News

Bull vs. bear: Can the S&P 500 keep rising in 2024?

We review the bull and bear case for the S&P 500 this year.

Read more »

woman with coffee on phone with Tesla
International Stock News

Why Tesla stock put pedal to metal today

Tesla's robotaxi is coming in August.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
International Stock News

If you invested $10,000 in Nvidia stock the day ChatGPT came out, this is how much you'd have today

Buying Nvidia when the disruptive AI chatbot launched would have been a smart move.

Read more »

A Tesla car driving along a road at sunset
International Stock News

Why Tesla stock was climbing today

Investors were encouraged by news of a price hike on the Model Y.

Read more »

Plate with coloured wedges being parcelled out like a slice of pie representing a share split
International Stock News

Stock-split watch: Is Nvidia next?

Nvidia last split its stock when it traded for a pre-split $744 in 2021.

Read more »

A woman in jeans and a casual jumper leans on her car and looks seriously at her mobile phone while her vehicle is charged at an electic vehicle recharging station.
International Stock News

1 Wall Street analyst thinks Tesla stock is going to $125. Is it a sell?

Tesla is no longer a magnificent stock, according to a Wells Fargo analyst.

Read more »

A young man goes over his finances and investment portfolio at home.
International Stock News

Is Nvidia stock a buy?

The company's stock could rise 40% over the next two years and outperform the S&P 500.

Read more »

Man with hands in the middle of two items with money bags on them.
International Stock News

Is Nvidia headed for a stock split?

Nvidia stock has split five previous times in the company's history.

Read more »