The NCI closed Sunday (8/21/22) 13.1% below last week’s closing. The index’s performance was influenced by ether (ETH), down 15.8%, while bitcoin (BTC) fell 11.5%.
Crypto asset prices came into the early hours (EST) of the new work week with strong momentum, with BTC attempting to edge past the $25,000 mark for the first time since mid June. ETH followed a similar trend, with the smart contract token surpassing the $2,0000 mark as Sunday gave way to Monday. Enthusiasm, supported by the previous week’s better than expected US inflation reading, was still dictating investor sentiment.
However, this midnight rally was short lived, with investors quickly shifting their focus from last week’s CPI figures to upcoming events, like the release of the Fed’s minutes, expected Wednesday. BTC and ETH registered $1,000 and $120 price drops, respectively, as equity markets were opening in North America.
Crypto asset prices remained mostly stable, with BTC registering small dips and bumps in its price chart into the last hours of Tuesday. After a brief rally in the early Wednesday hours, BTC’s price sank below $23,500 briefly after equity markets opened in the US.
The Fed released the July FOMC minutes, a document that reveals details about their previous monetary policy meetup, around lunchtime on Wednesday. The language used by the FOMC officials seemed mostly balanced and didn’t contribute anything particularly new to the inflation/rate hike discussion. Still, equity markets closed in the red that day. Crypto asset prices seemed to remain relatively unphased by the release.
The possibility of a pause to allow previous rate hikes to take effect was once again mentioned, although meeting notes clarified that rates would likely remain elevated for an extended period of time to ensure the Fed could guarantee that inflation returned to its 2% target. The revelation that at least some Fed officials were concerned about the possibility of a monetary overcorrection was the most optimistic bit of news found in the minutes.
However, on Thursday night digital asset prices began falling and then tumbling in the early hours of Friday. By late Friday night, BTC was down around 10% as prices dipped below $21,000, with ETH, altcoins and traditional markets all following suit.
The drop coincided with higher-than-expected Producer Prices Index figures from Germany that registered a record high of 37% in July, surpassing market predictions by 5%. Restricted gas supplies from Russia, soaring energy prices and continued supply chain disruptions have thrust Europe’s largest economy into stagnation and record high inflation.
The negative results came in the wake of negative inflation figures from the UK divulged a day earlier. The Consumer Price Index reading for Europe’s second largest economy showed July’s inflation increasing to 10.1% in comparison to the same month in 2021, a 40-year high also largely affected by energy prices.
Crypto prices registered another largely uneventful weekend, with prices benefiting from a slight recovery from Friday’s lows.
Blockdata, a market intelligence platform, divulged a study showing that 40 of the world’s 100 largest companies–including Alphabet (Google) and Samsung–invested roughly $6 billion in blockchain companies between September 2021 and June 2022.
FSInsight, a market research company, divulged a note that predicts that ETH’s price could reach $12,000 in the next twelve months on its way to surpassing Bitcoin as crypto’s largest market cap. According to Sean Farell, head of digital asset strategy at FSInsight, The Merge will reduce the issuance of tokens and reduce the current sell pressure from miners as a result of the smart contract platform switching to a Proof-of-Work consensus mechanism.
Acala, a Polkadot (DOT) based DeFi platform, has suffered a breach that allowed hackers to issue 1.3 billion tokens–resulting in a 99% drop in the price of the platform’s stablecoin (aUSD)–and to steal DOT tokens deposited in a liquidity pool. The stablecoin, launched earlier this year, has lost its dollar peg and is now worth a fraction of a penny.
Celsius Network, a crypto lending platform at the center of the crypto’s liquidity crisis that filed for bankruptcy in July, will be the target of an investigation by an independent examiner at the request of US. government officials. According to a US trustee, the investigation will examine the lending platform’s “business model, their operations, their investments, their lending transactions, and the nature of the customer accounts” as part of its bankruptcy proceedings.
What to look out for this week
Ethereum’s Merge is still weeks away, but developments–both positive or unforeseen–could still impact ETH prices. In the wake of the surprising Germany PPI figures, investor focus is likely to remain squarely on global inflation figures. On Friday, the release of PCE readings will shine a new light on this topic in the US. Finally, on the same day, the Fed will hold its annual economic symposium in Jackson Hole, Wyoming, where FOMC officials will share views on monetary policy that could temper investor expectations.
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