A Nansen analyst has provided insights into the recent crypto market rally that wiped out nearly $300 million in short positions, leading to a significant price recovery.

On May 21, the overall cryptocurrency market cap surged by hundreds of billions of dollars within hours. This rapid ascent was preceded by increased demand for Bitcoin (BTC), as 11 U.S. spot BTC ETFs saw over $950 million in outflows.

The analyst noted that the approval of spot Ethereum (ETH) ETFs played a crucial role in boosting market sentiment unexpectedly.

“The ETH ETF approval was completely priced out, and surprised markets positively,” the analyst explained.

Several issuers have updated their 19b-4 filings, which propose rule changes. Reports indicate that the U.S. SEC engaged providers on securities registration statements via S-1s following initial approvals. Despite this progress, the process may be gradual due to various factors, including political considerations.

Beyond on-chain performance and Wall Street’s crypto adoption, the analyst highlighted improved macroeconomic conditions. Short-term U.S. rates reportedly declined by 40 basis points in 30 days as the Federal Reserve moved to tame inflation.

Additionally, Nansen’s risk management indicators switched to “risk-on” between May 18 and May 19, signaling higher token levels.

“For now, it looks like we are riding an upward leg in crypto prices,” said the analyst.

At press time, market prices had steadied after a two-day surge that took BTC above $70,000 and ETH above $3,700. The total crypto market cap hovered around $2.7 trillion, while trading volumes had halved compared to the previous day.

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