Market Overview
Cryptocurrency markets are experiencing the first major rally of 2026. Bitcoin reached a high of over $97,000, and Ethereum edged close to $3,400 on Wednesday afternoon. Some analysts predict this is part of a larger bullish trend.
Cryptocurrency markets appear to be coming out of hibernation as Bitcoin and key altcoins reach price levels not seen in over a month. Ethereum rallied 5% over the last 24 hours, reaching a high of over $3,380 for the first time in the new year. Solana also saw some substantial gains, peaking at $148 Wednesday afternoon after hitting a low of $133 on January 8th.
Certain experts believe this rally is here to stay after Bitcoin broke well above the $95,000 resistance level that has plagued the cryptocurrency over the last few months.
Around $700 million of short positions were liquidated in light of this breakout, with many investors now eyeing a $100,000 target for BTC in the near future. This rally has created some much-needed optimism amongst cryptocurrency investors after a weak Q4 in 2025.
Key Variables Driving the Rally
The latest U.S. Consumer Price Index (CPI) report shows that inflation is starting to cool down, boosting expectations of additional rate cuts in 2026. Core CPI is down to 2.6% from 2.7%, with monthly CPI for both headline and core at 0.3%. This type of data has historically been positive for risk assets like cryptocurrencies, which was likely why it was one of the main catalysts for this rally.
Crypto ETF inflows remain positive as well, with reports indicating $1.2 billion was added to all cryptocurrency ETFs in the last 5 trading days. This shows that institutional sentiment is leaning toward accumulation, a good sign for markets.
Short-term momentum in crypto markets yesterday was also attributed to positive regulatory sentiment tied to progress with the Digital Asset Market Clarity Act of 2025 (CLARITY Act). Some goals of this bill are to “clarify the regulatory split between the SEC and CFTC, place most non-security digital assets under CFTC oversight, and reduce uncertainty around token issuance and secondary market trading.” The Senate Banking Committee published a draft of the bill yesterday with a markup vote scheduled later this week.
Market Slowdown and Future Expectations
The crypto community was torn over the first draft of the bill, with some prominent industry leaders expressing support and others expressing disdain. The markup vote was inevitably canceled upon Coinbase CEO Brian Armstrong publicly withdrawing his support for the bill in its current form.
He stated it has “too many issues,” including calls for government access to DeFi users’ financial records, a ban on tokenized equities, “erosion of the CFTC’s authority,” and more. Despite this, Armstrong stated he is still optimistic that with continued effort, the proper outcome with this bill can be achieved. This news has since caused markets to stall, as additional time will now be required to amend the bill.
Going forward, progress on the CLARITY Act, further news on rate cuts, and additional U.S. inflation and labor market data can all be seen as short-term catalysts that could generate another rally. The Fear & Greed Index is currently sitting at 54 (neutral), up from the low 20s (fear) in mid-December 2025. This demonstrates that overall market sentiment is significantly improving, but investors are still exercising a good degree of caution.