Bitcoin and other major altcoins have bounced back from their 2022 lows and are currently extending their advance as the latest US CPI print reinforced expectations that the Fed could scale down its aggressive approach on monetary tightening later in the year. In other news, Ethereum’s outperformance against Bitcoin persists ahead of a landmark development for the former. Can the latest rebound in crypto markets last and put an end to the heavily discussed ‘crypto winter’?
Crypto markets shine amid inflation easing
On Wednesday, the Bureau of Labor Statistics reported that the US consumer price index (CPI) surged 8.5% in July on an annual basis, while remaining unchanged from the previous month, mainly due to energy prices cooling off. Investors and markets interpreted this data point as a crucial factor that would take the pressure off the Fed to hike rates aggressively at the upcoming meetings in 2022. Bitcoin jumped 2% and Ethereum 7% immediately after the report, both closing the day with significant gains.
During 2022, high inflation is what killed cryptos, shuttering the myth that they could act as an inflation hedging tool and outlining that they are solely speculative assets. Therefore, major coins could potentially stage a relief rally and escape their recent highs as long as broader macroeconomic indicators continue to point towards a relaxation of the Fed’s tightening pace.
Ethereum upgrades its position in crypto space
Ether rose to a two-month high earlier today, capturing the $1,900 mark and outperforming Bitcoin ahead of the upcoming supposedly bullish upgrade. Since its creation almost a decade ago, Ethereum has been mined through a so-called proof-of-work model, which will now be replaced by the less energy intensive proof-of-stake. Ethereum’s transition is programmed to take place next month and is anticipated to generate a barrage of positive developments such as faster transactions, less mining costs and an increase in institutional inflows.
Adoption and systemic woes here to stay
On Wednesday, Schwab Asset Management released its Schwab Crypto Thematic ETF in response to increasing investor demand for exposure in the broader crypto space. This crypto-related ETF is different from existing ones because instead of trading cryptocurrencies it invests in a bundle of companies relevant to the crypto ecosystems, which are selected through an algorithmic approach.
On the other hand, the recent turmoil in crypto space is not likely to ease soon as another crypto exchange, Hodlnaut, halted withdrawals, while the US Treasury Department imposed sanctions on the Tornado Cash protocol. Hence, the never-ending emergence of flaws and failures in several cryptocurrency projects and business models continues to deliver significant blows to the trustworthiness of the broader crypto space, denting investor sentiment.
Technical picture improves
Taking a technical look, BTCUSD has been in a steady uptrend since it managed to halt its long-term decline at the 2022 low of $17,588.
To the upside, the May low of $25,390 could prove to be the first resistance point before the attention shifts to the $27,950 barrier.
Alternatively, should positive momentum wane and the price reverses downwards, the recent low of $22,625 might act as the first line of defence. Lower, the bears could target the 20,675 region.