Historically, a Santa rally happens in the weeks leading up to Christmas when a collective sense of goodwill bleeds into equity markets. This is typically a seasonal blip and nothing to write home about. But this year, we could see a far more significant rally as the United States Federal Reserve, the Securities and Exchange Commission and BlackRock line up to deliver a bonanza of holiday cheer.

The Federal Open Market Committee (FOMC) finished its penultimate meeting of 2023 on Wednesday, and it decided to hold interest rates steady. As we know, U.S. inflation has been tamed from a high of 9.1% in June 2022 to its current level of 3.7% thanks to the Fed’s aggressive interest rate hiking cycle that brought the Federal Funds Rate to 5.25-5.5% — its highest level since 2001.

However, while this campaign has been unquestionably successful, markets remain deeply concerned about the potential of higher rates, or even rates sustained at this level, to trigger a recession in the U.S. The Fed also now shares these concerns as it softens to some degree against inflation.

Related: Bitcoin is evolving into a multiasset network

Should the next Bureau of Labor Statistics inflation reading on Nov. 14 show a move downward, we can expect to see money flooding into risk assets as investors anticipate the next interest rate decision to be a cut. This will, of course, have a positive impact on equity markets, and even bond markets as yields fall and the back end of the yield curve flattens.

GUNDLACH: THINK CPI WILL COME DOWN BASED ON INFLATION MODEL

— *Walter Bloomberg (@DeItaone) November 1, 2023

Crypto markets will follow suit, with Bitcoin (BTC) remaining strongly correlated to main markets. What will provide an extra shot in the arm, though, will be the approval of the first U.S.-based Bitcoin spot ETF — which is likely to come before Jan. 10, as J.P. Morgan predicts. This is underlined by the excitement that rumors of the approval of BlackRock’s application have generated over the past few weeks, which sent Bitcoin back up to $35,000: a level it hasn’t enjoyed since the pre-Terra Luna days of 2022.

Eventual approval will provide further impetus for Bitcoin, Ether (ETH), and large swathes of altcoin markets. However, if investors are following the old adage, “buy the rumor, sell the fact”, it may not be huge. We might even see a small dip before a more sustained rally. There is little doubt, however, that approval will be positive for cryptocurrency. Indeed, longer-term it has the potential to be the greatest driver of crypto markets since the conditions created by the Covid pandemic saw BTC top $60,000 in 2021.

Related: Sam Bankman-Fried’s trial is telling a story of classic financial deceit

Potential spanners in the works include higher inflation in the U.S. before the end of the year, and potentially a ramping up of tensions between Israel and Palestine. Either of these could put the brakes on an end-of-year Santa rally — but that does not seem to be the direction of travel right now.

Indeed, Bitcoin has already enjoyed quite a rally this year. While the fallout from the FTX crash in November 2022 saw BTC fall to the $15,000 range and start 2023 at a paltry price of slightly more than $16,000, its level today of $34,000 to $35,000 represents growth of more than 100%. Of course, it’s only the very smart or lucky traders who ever manage to take advantage of Bitcoin’s extreme volatility. Year-on-year, many crypto investors are still nursing losses. 

For FTX investors, for example, while there are now hopes some will get their Bitcoin, Ether, and other tokens back, most will face somewhat of a Pyrrhic victory as they stare down the barrel of 60% to 70% losses. This accounts for the generally pessimistic mood in the crypto market, which would otherwise look like the winner of 2023.

As we approach the end of the year, then, it would do all of us well to take a step back and view Bitcoin and crypto markets with fresh eyes. Even if we don’t get a much anticipated and, perhaps, deserved Santa rally, we can celebrate the fact that crypto has survived another challenging year and is ending on a high.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Hacked cross-chain protocol Multichain has confirmed some transactions, and its backlog of queued transactions has declined to only a single transaction, according to data from Multichain’s explorer tool. Blockchain data confirms that some of the transactions have been confirmed on the destination chain, while others show as confirmed in the Multichain explorer but not on the destination chain.

Browsers with the Metamask wallet extension currently show a warning when users attempt to view the Multichain explorer, due to the fact that the protocol has been hacked. However, it can be viewed with a browser that does not have a Web3 wallet installed. Cointelegraph does not recommend connecting to Multichain with a wallet app, and the site itself may also be unsafe.

The transactions appear to be coming from a small number of addresses, indicating that they may be an attempt by the attacker to move funds or else part of a recovery effort by the team. As of 9:30 pm UTC, only a single transaction is listed as pending on Multichain’s explorer.

According to the Multichain block explorer, transactions started confirming at approximately 9 am on November 1.

Some transactions have been confirmed on the destination chain. For example, a deposit of approximately 20 DAI was made from Ethereum to Avalanche, which was confirmed on Avalanche at 1:56 pm UTC. However, a deposit of 0.1 BTC that was made from Ethereum to Polygon at 2:44 shows as confirmed on the Multichain block explorer but has not been confirmed on Polygon.

Blockchain analytics platform Cyvers detected the resumption of transactions in the morning, and posted the info to X (formerly Twitter).

UPDATE On July 6th, @MultichainOrg faced a $126M hack! We have detected real time

But today exciting news! @MultichainOrg has resumed processing bridge transactions after 117 days of downtime.

Many bridge transactions successfully went through.
️ We’re closely… https://t.co/KoizCgXYeJ pic.twitter.com/Nw4muay5xE

— Cyvers Alerts (@CyversAlerts) November 1, 2023

Some of the sending accounts show multiple transactions on November 1, indicating that the sender was confidant that the protocol would work correctly.

This is a developing story, and further information will be added as it becomes available.

Ether (ETH) price has declined by 14.7% since its peak at $2,120 on April 16, 2023. However, two derivatives metrics indicate that investors have not felt this bullish in over a year. This discrepancy warrants an investigation into whether the recent optimism is a broader response to Bitcoin (BTC) breaking above $34,000 on Oct. 24.

One possible reason for the surge in enthusiasm among investors using ETH derivatives is the overall market’s excitement regarding the potential approval of a spot Bitcoin exchange-traded fund (ETF) in the United States. According to analysts from Bloomberg, the ongoing amendments to the spot Bitcoin ETF proposals can be seen as a “good sign” of progress and impending approvals. This development is expected to drive the entire cryptocurrency market to higher price levels.

Interestingly, comments issued by the U.S. SEC Chair Gery Gensler’s in 2019 reveal his perspective. During the 2019 MIT Bitcoin Expo, Gensler termed the SEC’s position at the time as “inconsistent” because they had denied multiple spot Bitcoin ETF applications, while futures-based ETF products that do not involve physical Bitcoin had been in existence since December 2017.

Another potential factor in the optimism of Ethereum investors using derivatives may be the pricing of the Dencun upgrade scheduled for the first half of 2024. This upgrade is set to enhance data availability for layer-2 rollups, ultimately leading to reduced transaction costs. Moreover, the upgrade will prepare the network for the future implementation of sharding (parallel processing) as part of the blockchain’s “Surge” roadmap.

Ethereum co-founder Vitalik Buterin highlighted in his Oct. 31 statement that independent layer-1 projects are gradually migrating and potentially integrating as Ethereum ecosystem layer-2 solutions. Buterin also noted that the current costs associated with rollup fees are not acceptable for most users, particularly for non-financial applications.

Challenges for Ethereum competitors

Ethereum competitors are facing challenges as software developers realize the associated costs of maintaining a complete record of a network’s transactions. For instance, SnowTrace, a popular blockchain explorer tool for Avalanche (AVAX), announced its shutdown supposedly due to the high costs.

Phillip Liu Jr., head of strategy and operations at Ava Labs, pointed out the difficulties users face in self-validating and storing data on single-layer chains. Consequently, the substantial processing capacity required often leads to unexpected issues.

For example, on October 18, the Theta Network team encountered a “edge case bug” after a node upgrade, causing blocks on the main chain to halt production for several hours. Similarly, layer-1 blockchain Aptos Network (APT) experienced a five-hour outage on October 19, resulting in a halt in exchanges’ deposits and withdrawals.

In essence, the Ethereum network may not currently offer a solution to its high fees and processing capacity bottlenecks. Still, it does have an eight-year track record of continuous upgrades and improvements toward that goal with few major disruptions.

Assessing bullish sentiment in ETH derivatives markets

After evaluating the fundamental factors surrounding the Ethereum network, it’s essential to investigate the bullish sentiment among ETH traders in the derivatives markets, despite the negative performance of ETH, which has dropped 14.7% since its $2,120 peak in April.

The Ether futures premium, which measures the difference between two-month contracts and the spot price, has reached its highest level in over a year. In a healthy market, the annualized premium, or basis rate, should typically fall within the range of 5% to 10%.

Such data is indicative of the growing demand for leveraged ETH long positions, as the futures contract premium surged from 1% on Oct. 23 to 7.4% on Oct. 30, surpassing the neutral-to-bullish threshold of 5%. This surge in the metric follows a 15.7% rally in ETH’s price over two weeks.

Analyzing the options markets provides further insight. The 25% delta skew in Ether options is a useful indicator of when arbitrage desks and market makers overcharge for upside or downside protection. When traders anticipate a drop in Ether’s price, the skew metric rises above 7%. Conversely, phases of excitement tend to exhibit a negative 7% skew.

Related: 3 reasons why Ethereum price is down against Bitcoin

Notice how the Ether options 25% delta skew reached a negative 16% level on Oct. 27, the lowest in over 12 months. During this period, protective put (sell) options were trading at a discount, a characteristic of excessive optimism. Moreover, the current 8% discount for put options is a complete turnaround from the 7% or higher positive skew that persisted until Oct. 18.

In summary, the drivers behind the bullish sentiment among Ether investors in derivatives markets remain somewhat elusive. Traders may be expecting approval for Ether spot ETF instruments following Bitcoin’s potential approval, or they may be banking on planned upgrades that aim to reduce transaction costs and eliminate the competitive advantage of other blockchain networks like Solana (SOL) and Tron (TRX).