Although the new data shows strength in the U.S. economy, that could motivate the Fed more likely to continue with its aggressive rate hiking plan, which further weighs down on stocks on crypto.
“Crypto has been the hardest hit by rate hike fears this year,” said Callie Cox, U.S. investment analyst at eToro. “It makes sense – many crypto projects don’t have cashflows, so people invest in them for what they could be, not necessarily what value they’re providing right now. When rates rise, the future value of a dollar falls.”
Cox also pointed out the resilience of crypto assets in the second half of the year, highlighting that while stocks have plunged to new lows with the surge in bond yields, bitcoin and ether haven’t behaved the same. Bitcoin has been trading in a tight range of between $18,000 and $25,000 since falling to its lows of the year in June.
“To me, that’s progress in this bear market,” Cox said. “Crypto prices could be telling us the rate anxiety could be at a turning point. Crypto’s strength is also a good indicator of frothiness in the market. It seems like the brutal growth selloff has finally washed out all the weak hands.”
