Altcoins
Why Altcoins Surged This Week
Cryptocurrencies were up this week, but these smaller altcoins led the way.
THE cryptocurrency market Investors gained momentum this week as the risk curve flattened ahead of earnings season. Low inflation certainly helped, and high-beta stocks and cryptocurrencies were among the market’s biggest beneficiaries.
According to data provided by S&P Global Markets Insights, Battery (STX -1.83%) was one of the biggest gainers of the week, climbing 22.7%. Arbitration (ARB -0.62%) increased to 13.7%, and Bittensor (TAO 3.16%) was up 13.3% at its peak. All three tokens are up 20.6%, 12.6% and 8.5% for the week as of 4 p.m. ET Friday.
Inflation Gives Cryptocurrencies a Boost
The most tangible news of the week was the Consumer Price Index (CPI), which showed that inflation had come to a sudden halt in June. According to the Bureau of Labor Statistics, prices fell 0.1% month-on-month and rose just 3% year-on-year.
This doesn’t have a direct impact on 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 yield down 14 basis points over the past month.
One of the ironies of cryptocurrencies is that they are supposed to serve as a hedge against inflation, but in reality they trade more like growth stocks.
The Ups and Downs of Utility and Crypto
Most of the daily movements in the cryptocurrency market are based simply on speculation, but developers are trying to create real businesses with these tokens on the blockchain. We have seen progress on this front not only in 2024, but even this week.
Stacks, a layer 2 on the Bitcoin The blockchain has gained attention as Bitcoin has surged and now has 53 million STX in total value locked, up from 44.6 million a month ago.
Arbitrum DAO this week approved the diversification of its treasury into $25 million of stable, liquid, yield-bearing products. The move is aimed at maintaining the stability of blockchain operations.
Bittensor has been on the rise this week, thanks in part to a recovery from a drop earlier this month following an $8 million exploit. The entire network was briefly shut down, but the token has recovered nonetheless.
Politics Plays a Role in Crypto This Week
It’s also hard to ignore the political aspect of cryptocurrency trading right now. Cryptocurrencies have been something of a political football, with Democrats being relatively hostile to the industry over the past four years and Republicans seeing it as an opportunity to make friends in the cryptocurrency industry. Not only has former President Donald Trump come out in favor of cryptocurrencies, but there are also prominent members of Congress who are becoming relatively pro-crypto.
It’s never wise to invest based on politics, but the legal position of some cryptocurrencies will either be more stable or more questionable depending on who is in power. A more favorable political environment could mean greater regulatory certainty, whether through the legislature or regulators, and current polls indicate that this view is gaining ground among voters.
Volatility of smaller tokens
The cryptocurrency market has been up overall 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 both up and down moves, so it shouldn’t be that surprising for the week.
This also means that a reversal in cryptocurrency values next week could wipe out gains made this week.
Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.