The crypto market is witnessing a significant resurgence as major cryptocurrencies like Bitcoin, Ethereum, and Dogecoin are gaining momentum. Thursday’s volatility has shifted, and bullish traders are on the rise again.
This week has been turbulent for those invested in cryptocurrencies. While prices fluctuated significantly, many tokens seemed stagnant overall until this Friday. Bitcoin has surged by 5.6% over the past 24 hours, yet its weekly growth remains at 0.9%. Similarly, Ethereum climbed 3.9% today, with an overall increase of 1.2% over the same period. Dogecoin stands out with a 6.3% spike today after a minimal gain of 0.7% over the past week. These fluctuations come amid reactions to inflation data and its implications.
Recent reports indicate consumer prices have risen 2.4% over the last year. When excluding volatile items such as energy, core inflation soared by 3.3%. This sparked concerns that the Federal Reserve might not reduce interest rates as much in 2024 as initially expected, leading to market apprehensions.
The Interplay Between Cryptocurrency and Interest Rates
Cryptocurrencies, often seen as alternatives to traditional financial assets, have exhibited strong correlations with growth stocks over the years. As a result, economic indicators, especially inflation rates, can heavily influence their value. This relationship was evident when inflation concerns initiated a rate-hiking cycle by the Federal Reserve in 2022, impacting both growth stocks and crypto adversely.
Given that the Fed aims to maintain inflation around 2%, the elevated core inflation rates had pushed crypto values lower on Thursday, which some now view as an overreaction being corrected.
Challenging the SEC’s Stance
In recent weeks, Crypto.com has challenged the SEC by filing a lawsuit, arguing that the SEC exceeded its legal authority. This follows several court victories for crypto exchanges and developers, thereby strengthening their resilience against regulatory pressures. Tokens like Solana and ADA were initially marked as securities by the SEC, setting the stage for legal confrontations.
Coping with Crypto’s Volatility and Long-term Viability
Volatility has defined this week’s crypto narrative. Influenced by market factors akin to those impacting stocks, the long-term outlook for crypto might face challenges. Notably, innovative financial applications on the blockchain have predominantly utilized stablecoins. Visa’s data highlights a staggering $1.6 trillion in stablecoin transaction volume within just 30 days.
Should blockchain advancements continue to rely on stablecoins, prominent cryptocurrencies like Bitcoin, Ethereum, and Dogecoin could witness diminished investment appeal. The evolving blockchain ecosystem further emphasizes potential pressures on these tokens.
Travis Hoium holds positions in Ethereum and Solana. The Motley Fool holds investments and advises on Bitcoin, Cardano, Ethereum, Solana, and Visa. Please refer to their disclosure policy for more information.
For traders looking to enhance their strategies, Click Here For More Trading tips and strategies.
Discover more from Make Money Online and Work From Anywhere
Subscribe to get the latest posts sent to your email.
