Ethereum’s (ETH +5.95%) 7.3% move over the past 24 hours, as of 4:00 p.m. ET, is one I think investors are right to cheer today. After all, we haven’t had many days in which Ethereum has trended higher over the past four months or so. Thus, a move of more than 7% higher in such a short time frame is worth celebrating.

Ethereum

Today’s Change

(5.95%) $115.26

Current Price

$2052.23

Now, as is the case with most rallies in the cryptocurrency sector, it’s a sea of green today, with most tokens moving in the same direction. That said, among the five largest digital assets in the market, Ethereum is leading the way with today’s move.

Let’s dive into three key factors shaping today’s direction of travel for those invested in Ethereum.

What’s behind today’s incredible rise?

Source: Getty Images.

When a world-class asset like Ethereum gets beaten down to the extent it has over the past few months (falling more than 55% from its peak), one could argue that this crypto token has become too cheap to ignore for some investors. In concert with an inflation reading from the Consumer Price Index (CPI) report released this morning (which showed lower-than-expected inflation), investors increasingly believe that a weakening jobs market and continued improvements in inflation could lead to lower interest rates over time. That would be broadly beneficial for those who want to remain invested in more speculative, high-growth investments like Ethereum.

Another key factor to consider is Ethereum’s stalwart status as the leading decentralized finance (DeFi) player in the market. Given Ethereum’s outperformance when risk-on sentiment proliferates, due to its incredible network effects and importance in derivatives markets, this broad-based rally today has an outsize impact. That’s not a coincidence, in my view.

That brings me to my final point: a mass unwinding of bearish bets on Ethereum, mainly in the perpetual futures and derivatives markets, has led to a buying surge that has propelled this token higher faster than many of its peers. I’d expect this rally to continue, so long as momentum remains strong, and this token doesn’t enter overbought territory. Given how oversold Ethereum has become in recent weeks, I think it would take a much larger and protracted rally for such a scenario to unfold.