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| By Sam Blumenfeld |
Despite two disappointing inflation readings this week, Bitcoin (BTC, Tech/Adoption Grade “A-”) and other cryptocurrencies are trading higher.
On Wednesday, Producer Price Index data showed a 0.4% jump in September, doubling the expected 0.2% change. Yearly growth came in at 8.5%.
Yesterday’s Consumer Price Index data was no better, with the index increasing 0.4% for the month and 8.2% on the year. The market responded by dumping before staging a decisive rally off of recent lows.
As for Bitcoin, it’s challenging $20,000 again, but it could face resistance from the important psychological hurdle and 2017 bull market peak. BTC was able to maintain its neutral trend after finding support. It now trades safely toward the middle of its recent $17,500–$25,000 range.
Bitcoin overtook its 21-day moving average early in today’s trading session. The asset may jump past $20,000 if it continues rallying. But without a better inflation rating or a hint from the Federal Reserve that it will pivot, any sort of breakout above $25,000 is unlikely.
Here’s Bitcoin’s price in U.S. dollars via Coinbase (COIN):
Ethereum (ETH, Tech/Adoption Grade “A”) is up 3% so far today, back to around $1,330. ETH is safely within its sideways trading range after continuing yesterday’s rally.
However, the second-largest cryptocurrency by market capitalization still trails Bitcoin’s performance monthly with its 15% loss compared to BTC’s 2% drawdown.
Ethereum was able to cross above its 21-day moving average, but it hasn’t shown enough to consistently maintain itself above that level yet. If Ethereum can gather momentum as crypto approaches the end of the bear market, altcoins should follow suit.
Notably, Ethereum’s supply dropped by 4,000 tokens last week as more ETH was burned than created. The supply decrease marks the first deflationary period for the asset since it completed its merge to proof-of-stake consensus. The 4,000-token drop in supply accounts for a 0.13% decrease in total.
Here’s Ethereum’s price in U.S. dollars via Coinbase:
Index Roundup
The crypto market lost ground this week, but it was promising to see the late-week rally off of recent lows. Trading was mostly consistent throughout the market, but the established cryptocurrencies managed to extend their recent outperformance.
The Weiss 50 Crypto Index (W50) slid 6.69%, as most cryptocurrencies finished the week lower.
The Weiss 50 Crypto Ex-BTC Index (W50X) lost 7.75%, highlighting how Bitcoin managed to continue outperforming the broader market.
Breaking down this week’s performance by market capitalization, we see that results favored the established cryptocurrencies. Each of the market cap groups finished lower, but the larger the size, the better they held their value.
Large-cap cryptos lost the least, as the Weiss Large-Cap Crypto Index (WLC) slipped 6.51%.
Mid-cap cryptocurrencies finished in the middle of the pack, with the Weiss Mid-Cap Crypto Index (WMC) dropping 8.27%.
The small-caps fell the most by a narrow margin, as the Weiss Small-Cap Crypto Index (WSC) tumbled 9.05%.
The crypto market’s performance was consistent with last week, which makes sense as it moves closer to the end of crypto winter. As the market looks to begin the next uptrend, it will rely on Bitcoin and the large-caps to establish the direction.
Notable News, Notes and Tweets
- Nigel Farage, a former member of the European Parliament, says Bitcoin will become a “trusted means of exchange” in the EU as inflation erodes fiat purchasing power.
- El Salvador is looking for additional investments in its Bitcoin City after crypto winter caused setbacks and disruptions.
- DappRadar found that blockchain games and metaverse projects raised $1.3 billion in the third quarter.
What’s Next
Crypto is showing strength in an uncertain macroeconomic environment, but poor inflation readings will make it tougher to sustain a rally. Higher prices at both the wholesale and consumer levels will likely force the Fed to continue its current aggressive rate hike cycle despite calls for slowing down.
Crypto will also have to face uncertainty surrounding the war in Ukraine and regulatory scrutiny, but neither are risks to its long-term viability. When crypto sentiment improves, institutions should be a major driving force behind the next bull market.
The market is moving closer to the end of crypto winter, which lays the groundwork for a significant rally once macroeconomic, geopolitical and regulatory headwinds subside.
Best,
Sam
