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.
