Markets
Why Altcoins Jumped This Week
O cryptocurrency market came alive this week as investors moved up the risk curve ahead of earnings season. A low inflation reading certainly helped, and high-beta stocks and crypto were some of the market’s biggest beneficiaries.
According to data provided by S&P Global Market Intelligence, Stacks (CRYPTO: STX) was one of the biggest winners of the week, rising 22.7%. Referee (CRYPTO: ARB) rose as much as 13.7% and Bittensor (CRYPTO: TAO) was up 13.3% at its peak. The three tokens were up 20.6%, 12.6%, and 8.5% in the week through 4 p.m. ET on Friday.
Inflation gives cryptocurrencies a boost
The most tangible news this week was a Consumer Price Index (CPI) reading that showed inflation came to a sudden halt in June. According to the Bureau of Labor Statistics, prices fell 0.1% month over month and rose just 3% year over year.
This doesn’t directly impact 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 cut short-term interest rates in 2024. The market responded by pushing the 10-year Treasury rate down by 14 basis points last month.
One of the ironies of cryptocurrencies is that they supposedly serve as a hedge against inflation, but in reality they trade more like growth stocks.
Ups and downs of utilities and cryptocurrencies
Most of the daily movements in the cryptocurrency market are based on simple speculation, but developers are trying to build real businesses with these blockchain tokens. We’ve seen some progress on this front not only in 2024, but also this week.
Stacks, a layer 2 in Bitcoin blockchain, gained attention with the appreciation of Bitcoin and now has 53 million STX in total value locked, up from 44.6 million last month.
Arbitrum DAO approved diversifying its treasury this week into $25 million in stable, liquid, and yield-bearing products. This is intended to keep the blockchain’s operations more stable.
Bittensor surged this week in part as a recovery from a dip earlier in the month following an $8 million exploit. The entire network was briefly shut down, but the token recovered nonetheless.
Politics plays a role in cryptocurrency 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 being 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 come out in favor of cryptocurrency, but there are also prominent members of Congress who are becoming relatively friendly towards crypto.
The story continues
It’s never wise to invest based on politics, but the legal status of some cryptocurrencies will be more stable or more questionable depending on who is in power. A friendlier political environment can mean more regulatory certainty, whether through the legislature or regulators, and current polls indicate that this view is winning over voters.
Volatility of minor tokens
The cryptocurrency market overall was up this week, but smaller tokens like Stacks, Arbitrum, and Bittensor amplified the moves of larger tokens in the market. This is common in both bullish and bearish moves, so it shouldn’t be too surprising for the week.
This also means that a reversal in cryptocurrency values next week could undo the gains made this week.
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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
Why Altcoins Jumped This Week was originally published by The Motley Fool