Why Altcoins Jumped This Week

The crypto market has been buoyed this week as investors move up the risk curve ahead of earnings season. The low inflation reading certainly helped, and high-beta stocks and cryptocurrencies 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 gainers of the week, up 22.7%. Arbitrum (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% respectively for the week as of 4 p.m. ET on Friday.

Inflation gives crypto momentum

The most concrete news this week was the Consumer Price Index (CPI) reading, which showed that inflation came to a sudden halt in June. Prices fell 0.1% for the month and rose just 3% for the year, according to the Bureau of Labor Statistics.

This doesn’t directly impact crypto 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 reacted by lowering the 10-year Treasury rate by 14 basis points last month.

One of the ironies of cryptocurrencies is that while they are supposed to provide a hedge against inflation, they are actually traded like growth stocks.

Utility and the ups and downs of cryptocurrencies

Most of the daily movements in the crypto market are based on speculation, but developers are trying to build real businesses on the blockchain with these tokens. We have seen some progress on this front, not just in 2024, but even this week.

Stacks, the second layer of the Bitcoin blockchain, has attracted attention with the rise of Bitcoin and currently has a total value of 53 million STX; a month ago, this number was 44.6 million.

The Arbitrum DAO this week approved diversifying its treasury into $25 million worth of stable, liquid, yield-generating products, aiming to keep the blockchain’s operations more stable.

Bittensor has been bullish this week, in part due to a recovery from a drop earlier in the month following an $8 million exploit. The entire network was briefly shut down, but the token has still recovered.

Politics play a role in cryptocurrencies this week

The political aspect of crypto trading is also hard to ignore right now. Crypto has become something of a political football, with Democrats being relatively hostile to the industry over the last four years and Republicans seeing it as an opportunity to make friends in the crypto space. Not only was former President Donald Trump supportive of crypto, but there are also prominent members of Congress who have become relatively crypto-friendly.

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 could mean more regulatory certainty, whether through the legislature or regulators, and current polls suggest that this view is winning over voters.

Volatility of smaller tokens

The crypto market has been generally bullish this week, but smaller tokens like Stacks, Arbitrum, and Bittensor have magnified the moves of larger tokens in the market. This is common with ups and downs, 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 has a position in Bitcoin and recommends Bitcoin. The Motley Fool has a disclosure policy.

The article Why Altcoins Soared This Week was originally published by The Motley Fool