The prices of Ethereum and other leading digital currencies have also rallied over the past two months, raising hopes that this emerging market may have bottomed. Coinbase reported a second-quarter loss after Tuesday’s closing bell. This follows Monday’s sales warning from Nvidia (NVDA), whose graphics cards are a key component in many Bitcoin mining rigs.
With this in mind, some experts believe that Bitcoin could remain stuck in a narrow range for the foreseeable future. Yes, so investors may not need to worry that prices will fall much further. But a major rally may not be in sight either.
“Bitcoin is treading water,” wrote Martin Hiesboeck, head of blockchain and crypto research at Uphold, a crypto wallet firm, in a recent report. “The market is subdued.”
However, Hiesböck added that it is encouraging to see that “any move down is immediately met with large buy orders” from large institutional investors. But he expects the breakneck volatility that has become a hallmark of crypto trading to persist.
“Many investors are concerned that the macroeconomic outlook won’t improve any time soon, so they sell any price gains. At the same time, institutions and savvy investors seem to believe that Bitcoin has bottomed and continues to accumulate,” he said, adding that “such moves often result in excessive price action.”
This type of volatility could finally die down as more traditional Wall Street firms enter the crypto market. Bitcoin bulls are pointing out that a recent deal between Coinbase and money management giant BlackRock (BLK) is a promising sign.
“BlackRock and Coinbase’s partnership is a huge deal,” Jack Cameron, co-founder of Luna Market, a Metaverse advertising and technology company, said in an email.
Cameron added that as Bitcoin “still has a stigma attached to it,” more companies like BlackRock are delving into the topic Digital asset sector is good news.
“The more institutional money [that] joins the space, the better for all crypto holders,” he wrote.
That could be true. But in the short term, investors may be waiting to see what happens on the inflation front. Despite hype from proponents that it is digital gold, Bitcoin has not emerged as an asset that does well as inflationary pressures mount and interest rates rise.
As such, investors may need to spot some signs that inflationary pressures are finally peaking before deciding to push bitcoin prices even higher. Traders will be in a better position to assess this after the much-anticipated July Consumer Price Index (CPI) is released Wednesday morning.
“Inflation killed bitcoin late last year, and if price pressures show clear signs of slowing down, bitcoin could burst beyond its recent trading range,” Edward Moya, senior market analyst for the Americas at OANDA, a forex trading firm, said in a report.
Is inflation finally calming down?
Inflation concerns consumers, investors, politicians and of course the Federal Reserve. Will the pace of price increases finally cool down a bit?
Economists polled by Portal forecast consumer prices to have risen 8.7% over the past 12 months. That’s still a historically high level, but it would be a slowdown from the 9.1% gain through June.
Investors are realizing that inflation will not magically disappear overnight. But any signs that price pressures are easing (even slightly) should be cheered.
Consumers would also be delighted. My CNN Business colleague Nathaniel Meyersohn reported earlier this week that grocery giant Tyson (TSN) has noticed a major impact of inflation, with shoppers swapping more expensive beef for cheaper chicken. Americans have routinely faced supermarket sticker shock for the past year. But there’s 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 online retail prices, Adobe recently reported that e-commerce prices fell 1% year over year in July.
The prices for electronics and toys sold online fell the most. Clothing was also cheaper to buy online. But food prices rose in July. And pet product prices rose nearly 13% online, hitting a record high.
As a relatively new owner of two kittens, which means I’m now also a Chewy (CHWY) customer, I now totally understand the urge to spend big on furry friends.
Rising energy costs are hitting UK consumers hard
Inflation is a global problem. And it’s particularly painful for UK consumers who face significantly higher energy bills this winter.
My CNN Business colleague Anna Cooban notes that around a third of UK households will see their income fall below the poverty line after paying heating bills in the first quarter of 2023.
Because by January, energy costs are expected to more than double. Energy prices have already risen by 54% this year, prompting some Britons to choose between ‘heating and eating’. The UK government earlier this year approved a consumer relief package to ease this inflationary burden.
But some argue the support doesn’t go far enough to offset rapidly rising fuel costs. And more stimulus checks may not be on the horizon either. British Foreign Secretary Liz Truss, the leading contender to succeed Boris Johnson as Britain’s next prime minister, has proposed tax cuts… but no more direct aid.
Next
US CPI for July; Earnings 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)