Is the crypto sector more influenced by the setbacks of the traditional economy than we think? The latest price trends seem to confirm this.
Cryptocurrencies vs inflation: an illusion?
Cryptocurrencies have often been seen as lifelines in times of economic crisis. If, during its explosion in 2017, the alternative economy was still relevant, the increasingly strong correlation of Bitcoin with the traditional markets subjects the sector to more stakes. With rising inflation, digital currencies have emerged, some experts say, as a solution. According to them, the stronger the latter, the more the population would try to save themselves by investing in Bitcoin. However, nothing went as planned.
Indeed, US inflation is less strong than we think. The news had the effect of an outcry since the phenomenon seems to have stabilized instead of climbing exponentially. Inflation would therefore be 8.5% in July, instead of the 8.7% forecast. Cryptocurrencies benefit from the announcement and find their way back to ancestry. The predictions of the experts therefore did not come true, demonstrating that the crypto does not need monstrous inflation to regain value. Worse still: it could possibly mean that digital currencies are much more influenced by the vagaries of traditional economics than one might think. Thus, instead of benefiting from failing markets, crypto could be dependent on them performing well.
Crypto regains some colors
According Bloomberg, Ethereum (ETH) would be the first to benefit from the phenomenon. Vitalik Buterin’s coin indeed saw its price climb by 12%. At the time of writing, ETH is worth no less than $1,925 and continues to rise, driven by the upcoming arrival of The Merge.
The inflation surprise has also not escaped Bitcoin, which now climbs to $24,668. Just like its competitor, the small orange piece is the subject of a double phenomenon. That, of course, of this unexpected news but also of the rise in traditional prices. The New York Stock Exchange ended higher as well as the Nasdaq, to which Bitcoin is correlated.
For the moment, no sign of descent is detectable on the curves. The future will therefore tell us how much the news will have boosted cryptocurrencies. Either way, there are plenty of coins to benefit from the rise of these two industry giants. Something to bring a smile back, at least for a time, to the crypto sector.
However, the crisis is far from over and the enthusiasm linked to inflation could quickly wane if it were to pick up again. The crypto sphere has not completed its purge and the coins are not fully out of the woods yet. According to Mark Yusko, director of Morgan Creek, we would have to wait another 2 years before seeing a first definitive improvement in the price of Bitcoin. Some cold sweats are therefore potentially to be expected.
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