The cryptocurrency market lost momentum in the last 7 days as the bull rally faltered and the bears took over. Geopolitical uncertainty and macroeconomic news were the top stories this week as institutional confidence waned. While inflation subsided to 2.8% last July, core inflation (driven by housing and food sectors) remained at 3.15% causing investors to rethink their future investments.
The U.S. government continued pushing its tariff policies that will ultimately disrupt the manufacturing and logistics sectors and companies are currently looking at ways to hedge against these tariff shocks. Tariffs are affecting the crypto market as cryptocurrency becomes more integrated into the global economy through stablecoins, payment methods and tokenization of assets.
Therefore, crypto is very susceptible to inflation and any other disruptions that rock traditional markets. This in turn impacts the investing behavior of buyers either positively or negatively.
BTC on the Decline
Bitcoin dropped almost 3% in the last week, currently trading around 115.2k USD. Market indicators show that BTC investors that have held for the past year are incrementally taking profits. If this continues it could spark a massive sell-off and BTC could fall even further. BTC hit all-time highs last week of 124.1k USD and traditionally the market retreats or consolidates before another surge to a new all-time high. The market could also go sideways while it consolidates, adopting a wait and see approach after assessing macroeconomic factors.
A major factor for the whole crypto market (not just BTC) is the Feds interest rate announcement on September 17th. Analysts have stated that 83% of the market anticipates a rate cut but investors may continue to sit on their hands until that announcement. BTC also saw 550m USD inflows into BTC last week but it paled in comparison to ETH inflows of 2.88b USD of which the U.S. was responsible for 99% of the total inflow.
Will Ethereum Breakout to an All Time High in the Short Term?
Ethereum flirted with an all-time high last week, touching 4,783 USD before retreating to its current price of 4.2k USD… just below all-time high of 4,869 USD. Indicators show that momentum is slowing even though ETH has pulled back only 0.26%. Some market analysts have stated that market sentiment for ETH hitting 5k USD by the end of August has fallen from 63% to 25%, sparked by the volatility that saw ETH drop 600 USD.
Institutional inflows, exchanges and trading volumes are currently surpassing BTC but may trigger profit taking if ETH falls any further. Traders remain optimistic as ETH chases an all-time high and BTC retreats, giving investors more confidence in an ETH price surge.
Will Doge Plummet After Threat from Qubic?
Dogecoin could come under attack from Qubic, an AI-driven protocol that recently took over 51% of the mining power of Monero (XMR). Basically, this means that one mining pool controls most of another’s network computing power and controls a majority of the hash rate. This attack underscores tensions between new AI related projects and well established blockchains.
The Qubic community voted that Doge would be the next target but the timing of the plan hasn’t been set. This announcement spiked Doge trading by over 77% in the past day and the price dropped over 5% but has since recovered and Doge is trading at 0.2196 USD. Qubic has stated that they aren’t out to destroy blockchains but to expose vulnerabilities in PoW protocols, but these scenarios could cause backlash from the crypto community. In the meantime, the entire industry will have to examine their security protocols, Pow and PoS specifically, to ensure investor confidence.
USDT Expansion
In the past few months, stablecoins have exploded and have become the new treasury of choice for large corporations. Coinciding with this new adoption, stablecoin issuers have started launching their own L1 blockchains. These companies have become close to U.S. regulatory bodies and their staff to gain insights and provide technical knowledge to these committees to strengthen their positioning in the market.
A member of the Trump administration has recently joined Tether to help expand USDT in the red hot stablecoin sector. Bo Hines who assisted in getting the GENIUS Act passed by congress was hired by Tether because of his ties to policy makers and to increase U.S. stablecoin expansion. His new position at Tether is Strategic Advisor for Digital Assets and U.S. Strategy. His main functions will be to develop relationships with U.S. policymakers and assist in U.S. market entry. Tether has assets in the U.S. of over 5b USD and Hines will further domestic investments.
Selloff or Breakout?
When BTC failed to breakout, the entire market pulled back, with altcoins seeing the biggest retracements. Macroeconomic and geopolitical news continue to be major factors in the current market. The inflows to ETH and outflows of BTC are reversals from a couple of weeks ago but are mainly for ETFs in the U.S. So, is the market in a bear trap or will the bulls take over and continue to push BTC and altcoins to new highs??
