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The cryptocurrency market has seen a surge over the past week, with coin prices increasing significantly and investor sentiment rising. However, having recently crossed the trillion dollar mark, what are the chances of 5x growth for the market this year?

Crypto Market Posts Gains as Inflation Cools

As 2023 dawns, the crypto market appears to be on track to recoup some of the losses suffered last year. Coin prices are increasing significantly, with the broader market also seeing impressive gains.

The crypto market is currently valued at $990 billion. It is the first time it has reached this level since November 2022, before the collapse of the defunct FTX cryptocurrency exchange.

Significant increases of several top coins drive the current gains in the market. Investor sentiment towards digital assets is also improving, with Bitcoin exiting the “Fear” region of the Crypto Fear and Greed Index for the first time in nine months.

The current decline in US inflation is the main driver of market gains. The world’s largest economy has been battling rising inflation for months, and in order to control that measure, the Federal Reserve has embarked on an aggressive hike in interest rates. The goal is to reduce the amount of money in circulation, thereby cooling inflation and keeping the metric in check.

After several months, the Fed’s strategy is beginning to bear fruit. The Consumer Price Index (CPI) Last week, inflation fell 0.1% last month, with the headline rate now standing at 6.5%. This led many investors to speculate that the Fed might ease some of its monetary policies, allowing investors to buy risky assets again, especially cryptocurrencies.

Crypto Rises as Dollar Falls

Another indicator of market health is the falling dollar. Crypto prices and the dollar has moved in opposite directions over the past year, and with the current drop in inflation, investors seem to be turning away from fiat money.

The US Dollar Index (DXY), an index that measures the growth of the greenback against a basket of other major currencies, shows that the value of the dollar has fallen significantly since the start of the year. This reflects the willingness of investors to turn away from it and buy other assets instead.
Rising inflation benefits the dollar because investors around the world demand it to protect their wealth. However, as the metric begins to decline, investors’ appetite for the US dollar also appears to be waning.

Is $5 trillion at stake?

As of now, the crypto market is back on a bull run. While whale investors are delighted, it is important to note that the market is not off the hook.

On the one hand, the Fed’s fight against inflation is still ongoing. Investors believe the agency will scale back interest rate hikes this year, but the Fed has indicated it will only do what is in the best interest of the economy. If Fed pundits don’t think an interest rate cut is prudent at the Federal Open Market Committee (FOMC) meeting this month, then the crypto market’s choppy journey will continue. will continue.

There is also the ongoing fallout from the FTX exchange. Several big names in crypto – including the Digital Currency Group (DCG), crypto exchange Gemini, and many more – are still looking to weather the storm and navigate the market without going bankrupt.
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