Altcoins
Why Altcoins Surge This Week
THE cryptocurrency market came to life this week as investors moved up the risk curve ahead of earnings season. A low inflation reading certainly helped, and high-beta stocks and cryptocurrencies were among the market’s biggest beneficiaries.
According to data provided by S&P Global Market Information, pile (CRYPTO: STX) was one of the biggest gainers of the week, up 22.7%. Referee (CRYPTO: ARB) rose as much as 13.7% and Bittensor (CRYPTO: TAO) is up 13.3% at its peak. The three tokens are up 20.6%, 12.6%, and 8.5% for the week as of 4:00 PM ET on Friday.
Inflation Gives Cryptocurrencies a Boost
The most tangible news this week was the Consumer Price Index (CPI) reading, which showed that inflation suddenly stopped in June. Prices fell 0.1% month over month and rose only 3% year over year, according to the Bureau of Labor Statistics.
This does not directly impact the cryptocurrency markets, but valuations are often correlated with the stock market, and stocks tend to rise when interest rates fall and fall when interest rates rise. Lower inflation likely means the Federal Reserve will be willing to lower short-term interest rates in 2024. The market has responded by pushing the 10-year Treasury rate down 14 basis points in the past month.
One of the ironies of cryptocurrencies is that they are supposed to be a hedge against inflation, but in reality they trade more like growth stocks.
Utilities and Cryptocurrencies: Ups and Downs
Most of the day-to-day movements in the cryptocurrency market are simply speculation, but developers are trying to build real assets with these tokens on the blockchain. We’ve seen some progress on that front not only in 2024, but also this week.
Stack, a level 2 on the Bitcoin The blockchain has attracted attention as Bitcoin has grown and now has a total value locked of 53 million STX, up from 44.6 million a month ago.
Arbitrum DAO approved this week to diversify its treasury into $25 million of stable, liquid, and yielding products. This is intended to keep the blockchain operations more stable.
Bittensor has surged this week in part as it recovers from a dip earlier this month following an $8 million exploit. The entire network was briefly shut down, but the token has since recovered.
Politics plays a role in cryptocurrencies this week
It’s also hard to ignore the political aspect of cryptocurrency trading right now. Cryptocurrency has been something of a political football with Democrats relatively hostile to the industry over the past four years and Republicans seeing this as an opportunity to make friends in the cryptocurrency industry. Not only has former President Donald Trump spoken out in favor of cryptocurrency, but there are also prominent members of Congress who are becoming relatively pro-crypto.
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It’s never wise to invest based on politics, but the legal standing of some cryptocurrencies will be more stable or more questionable depending on who’s in power. A friendlier political environment could mean more regulatory certainty, whether from the legislature or regulators, and current polls suggest that this view is winning over voters.
Volatility of smaller tokens
The cryptocurrency market as a whole has been rising this week, but smaller tokens like Stacks, Arbitrum, and Bittensor have been amplifying the moves of larger tokens in the market. This is common in moves up and down, so it shouldn’t be too surprising for the week.
This also means that a reversal in cryptocurrency values next week could erase the gains made this week.
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Travis Hoium has no position in any of the securities mentioned. The Motley Fool has a position in Bitcoin and recommends it. The Motley Fool has a disclosure policy.
Why Altcoins Surge This Week was originally published by The Motley Fool