Ethereum
Bitcoin and Ethereum rebound after a week of brutal losses – here’s why – DL News
- Crypto markets have turned bullish after last week’s carnage.
- Fed Chairman Powell said a rate hike was “unlikely.”
- Concerns about high inflation and unemployment have disappeared, according to the analyst.
Crypto markets have losses recovered following last week’s crash, which saw Bitcoin fall as low as $56,000.
The renewed optimism comes amid slowing job growth – a possible sign of slowing inflation – and hopes of rate cuts later this year.
Today, the largest cryptocurrency is trading again at just over $65,000. The second largest Ethereum is up 11% since its low last Wednesday.
Overall, the broader cryptocurrency market added some $200 billion, according to CoinGeckosince Federal Reserve Chairman Jerome Powell spoke on May 1.
He signaled that a rate hike – when the central bank raises interest rates and increases borrowing costs for banks and businesses – would be “unlikely.”
Still, “the path is far from clear” for the Federal Reserve to begin lowering interest rates soon, according to Noelle Acheson, author of the newsletter “Crypto is Macro Now.”
Interest rates in the United States have reached record highs as the Federal Reserve battles soaring inflation fueled by the COVID-19 pandemic. High interest rates also increase the amount people earn on their bank balances, which also incentivizes them to conserve their cash rather than spend it.
Rate hikes are therefore less beneficial for stocks and riskier investments like cryptocurrencies, as shown by the spectacular fall of Bitcoin and Ethereum last week.
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In the first quarter, US economic growth slowed to its lowest level in almost two years. This deceleration was partly attributed to a moderation in consumer spending and a growing trade deficit, or a country importing more goods than it exports.
When rates are higher, business loans become more expensive, discouraging owners from expanding or hiring. Ripple effects can also slow down the economy as a whole.
Recent employment data released Friday, for example, revealed the slowest job growth in six months and lower than last year’s average monthly gain.
Stagflation is “behind us”
High unemployment, combined with inflation and slowing economic activity, would spell even more trouble for Powell.
Powell’s main focus these days is avoiding stagflation, an economic climate in which the economy continues to face high inflation while in recession.
According to crypto venture capital firm Ryze Labs, this situation seems less likely to occur.
“While rate hikes are off the table and markets are already pricing in little to no cuts for 2024, we think this bodes well for risky assets,” Ryze Labs analysts said. DL News.
“The worst of the stagflationary headwinds may be behind us,” they said.
Crypto market players
- Bitcoin is up 2.6% in the past 24 hours and is trading at $65,200.
- Ethereum jumped 1.9% to $3,200.
What we read
Sebastian Sinclair is markets correspondent for DL News. Do you have any advice? Contact Seb at sebastian@dlnews.com.