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CNN Business
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Is crypto winter finally over? (And in the scorching heat of summer no less?)
Bitcoin prices have stabilized around the $23,000 to $24,000 level after dipping below $20,000 in June.
The prices of ethereum and other leading digital currencies have also risen over the past two months, leading to hopes that this nascent market may have bottomed out.
But optimism can be premature and fleeting. Companies with direct ties to the crypto landscape continue to struggle.
Coinbase reported a loss for the second quarter after the closing bell on Tuesday. It follows Monday’s earnings announcement from Nvidia (NVDA), whose graphics cards are a key component in many bitcoin mining rigs.
With all this in mind, some experts believe bitcoin may be stuck in a narrow range for the foreseeable future. So yes, investors may not have to fear that prices will fall much longer. But a big rally may not be in the cards either.
“Bitcoin is treading water,” Martin Hiesboeck, head of blockchain and crypto research at Uphold, a crypto wallet firm, wrote in a recent report. “The market is muted.”
However, Hiesboeck added that it is encouraging to see that “every move down is immediately met with large orders” for purchases from large institutional investors. But he expects the breakneck volatility that has become a hallmark of crypto trading to continue.
“Many investors are concerned that the macroeconomic outlook will not improve anytime soon, so they are selling every price increase. At the same time, institutions and savvy investors seem to believe that bitcoin has formed a bottom and is continuing to rally,” he said adding that “such moves often drive excessive price action.”
This kind of volatility may finally subside a bit as more traditional Wall Street firms enter the crypto market. Bitcoin bulls point to a recent deal between Coinbase and money management giant BlackRock ( BLK ) as a promising sign.
“The partnership between BlackRock and Coinbase is a huge deal,” Jack Cameron, co-founder of Luna Market, a metaverse advertising and technology company, said in an email.
Cameron added that since there is “still a stigma” attached to bitcoin, several companies such as BlackRock have dived into digital asset sector is good news.
“The more institutional money [that] joins the space, the better for all holders of crypto,” he wrote.
That may be true. But in the short term, investors can wait to see what happens on the inflation front. Bitcoin, despite the hype from proponents that it is digital gold, has proven not to be an asset that performs well when inflationary pressures increase and interest rates rise.
So investors may first need to see some signs that inflationary pressures are finally starting to peak before they decide to push bitcoin prices even higher. Traders will have a better sense of that after the much-anticipated consumer price index (CPI) report for July comes out on Wednesday morning.
“Inflation is what killed bitcoin late last year, and if price pressures show significant signs of easing, bitcoin may be able to break above its recent trading range,” Edward Moya, senior market analyst for the Americas at OANDA, a forex trading company, said. in a report.
Inflation is on the minds of consumers, investors, politicians and, of course, the Federal Reserve. Will the pace of price increases finally start to cool a bit?
Economists polled by Reuters forecast that consumer prices rose 8.7% over the past 12 months. It is still a historically high level, but it will be a decrease from the increase of 9.1% through June.
Investors realize that inflation is not going to magically disappear overnight. But any sign that price pressures are beginning to ease (even modestly) should be cheered.
Consumers would also be excited. My CNN Business colleague Nathaniel Meyersohn reported earlier this week that grocery giant Tyson ( TSN ) has noticed a big impact from inflation: shoppers ditching more expensive beef for cheaper chicken. Americans have been routinely faced with sticker shock at the supermarket for the past year.
But there is some good news for consumers who prefer clicks to bricks. My colleague Matt Egan reports that after more than two years of monthly increases in e-commerce prices, Adobe recently reported that e-commerce prices fell 1% year-over-year in July.
The prices of electronics and toys sold online fell the most. Clothes were also cheaper to buy online. But grocery prices rose in July. And prices of pet products online rose by nearly 13%, breaking records in the process.
As a relatively new owner of two kittens, which means I’m also now a Chewy (CHWY) customer, I now understand the urge to spend a lot of money on furry friends.
Inflation is a global problem. And it is particularly painful for UK consumers, who face the prospect of significantly higher energy bills this winter.
My CNN Business colleague Anna Cooban notes that about a third of UK households will see their income fall below the poverty line after paying heating bills in the first quarter of 2023.
That’s because energy costs are expected to more than double by January. Energy prices have already risen by 54% this year, leaving some Brits choosing between “heating and eating”. The UK government approved a relief package earlier this year for consumers to try to ease this inflationary burden.
But some argue that the subsidy does not go far enough to compensate for rapidly rising fuel costs. And more stimulus checks may not be in the cards either. British Foreign Secretary Liz Truss, who is the leading candidate to replace Boris Johnson as Britain’s next prime minister, has proposed tax cuts…but no more direct aid.
US Consumer Price Index for July; Revenue from Disney ( DIS ), Fox Corporation ( FOXA ), Wendy’s ( WEN ), and Bumble
Coming Tomorrow: US Producer Price Index for July; weekly US jobless claims: OPEC monthly oil report; Earnings from Cardinal Health (CAH), Azul (AZUL), Hanesbrands (HBI), Six Flags (SIX), Warby Parker, and Canada Goose (GOOS)
