Crypto Continues Running After Solid Inflation Report
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| By Sam Blumenfeld |
Bitcoin (BTC, Tech/Adoption Grade “A-”) and the broad crypto market are extending recent gains after December’s inflation report showed 6.5% year-over-year price increases.
The findings were in line with economists’ estimates and point to a greater likelihood of a Federal Reserve pivot in the pipeline.
While we will have to wait until Feb. 1 for the Fed’s next interest rate decision, expectations skyrocketed to a 93% chance of a smaller hike compared to a 61% probability last week.
Now, the market is pricing in a much higher probability of another slowdown to a 25-basis-point hike.
That’s good news for technology stocks and other risk assets which have extended gains since the beginning of the year, including crypto.
In fact, Ethereum (ETH, Tech/Adoption Grade “B”), is marking a 19% year-to-date gain. It’s down marginally today, but it crossed a key trend line when it retook the $1,400, exciting the Weiss Crypto analysts.
Source: Coinbase.
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If it can finish the day positively, today will mark ETH’s sixth-consecutive green candle.
And keep in mind, Ethereum’s strength bodes well for other altcoins that follow its price action closely.
The second-largest crypto by market cap has looked better than traditional market leader Bitcoin (BTC, Tech/Adoption Grade “A-”) since establishing its bear market low of $880 in the summer of 2022. ETH pressed forward from there and now looks like it may establish a breakout.
On the other hand, BTC made its current bear market low much later — in November 2022 — and has come close to retesting its low multiple times.
But lagging doesn’t mean down and out. Bitcoin is also enjoying a small rally as it currently boasts a 17% gain year to date. Additionally, it’s reclaimed the significant $19,000 level, cutting through resistance at $18,400 like a hot knife through butter.
Bitcoin is up about 2% today and stands to also log six consecutive green days if today’s price action holds.
Click here to see full-sized image.
BTC consistently closed above its 21-day moving average — shown above by the blue line — since it managed to retake it on Jan. 4.
Now BTC has much more breathing room above its established bear market low of $15,500. If the asset can continue building momentum, crypto winter could soon be in the rearview mirror.
It’s important to note, though, that it hasn’t risen enough to rule out further weakness. As such, we’ll be keeping a close eye on Bitcoin.
Notable News, Notes and Ratings
- Ten cryptos currently hold ratings of “B-” or better after multiple upgrades raised two additional assets into our “Buy” category since last week:
- Bitcoin (BTC, Overall Grade “B+”)
- Chainlink (LINK, Overall Grade “B”)
- OKB (OKB, Overall Grade “B”)
- Polygon (MATIC, Overall Grade “B”)
- Aave (AAVE, Overall Grade “B-”)
- Cardano (ADA, Overall Grade “B-”)
- Ethereum (ETH, Overall Grade “B-”)
- Litecoin (LTC, Overall Grade “B-”)
- Stellar (XLM, Overall Grade “B-”)
- Uniswap (UNI, Overall Grade “B-”)
- FTX has recovered over $5 billion in cash and crypto as the company moves forward with bankruptcy proceedings. FTX is thought to have $8.8 billion in total liabilities.
Founder Sam Bankman-Fried pleaded not guilty to all criminal charges surrounding the exchange’s collapse. - Samsung Asset Management will launch the “Samsung Bitcoin Futures Active ETF” for investors in Hong Kong. The move comes after the company noticed increased demand for exposure from the government and institutional investors.
- Hong Kong’s Securities and Futures Commission will begin a new licensing program that will limit retail investor trades to “highly liquid” digital assets. The regulatory agency will put restrictions in place that only allow the trading of major assets.
- The Republican-controlled House of Representatives will create a crypto-focused subcommittee. House Financial Services Committee Chair Patrick McHenry noted a “big hole” in the committee’s structuring, so the subcommittee will work on covering digital assets and financial innovations.
What’s Next
The ice is starting to thaw as the crypto market finally looks to approach the end of crypto winter.
However, just like last year, investors will still be keeping a close eye on the Fed’s statements and interest policy decisions. With inflation cooling down, the Fed could look to prevent a deeper recession by shifting policy soon.
And this shift may come sooner than we think.
Bank earnings can be used as an indicator for broader economic health, and it’s not looking so good. Four major banks kicked off earnings season today, and their results did little to reassure investors hoping to avoid a recession.
If the economy worsens, the Fed could look to soften the effects.
Overall, short-term macro challenges from inflation and a potential recession could continue acting as a headwind for prices in the short term.
The silver lining is that adoption and institutional demand continue improving crypto’s strong fundamentals.
Best,
Sam
