Cryptocurrencies are back in summer

Over the weekend, the quotes of the leading cryptocurrencies broke away from the two-three-month lows they were at in early September and returned to mid-August values. In part, bullishness was triggered by the recovery of the US stock market, the interest of large investors in bitcoin, and the imminent introduction of a new cost-effective mining algorithm for ether. However, the prospects for the virtual currency market look unstable, including against the background of the expected aggressive rate hike by global regulators.

Quotes of the leading cryptocurrencies began to grow over the weekend after several weeks of stagnation. According to coinmarketcap.com, bitcoin (BTC) quotes reached $21.8 thousand, the highest since August 26. For the week, the growth was 9.5%. Ether (ETH) rose in price to $ 1.79 thousand, updating the maximum since August 19 and adding more than 13% in a week. The quotes of such cryptocurrencies as BNB, XPR, Cardano, Solana, Polkadot, Dogecoin increased by 6–11% over the week.

Experts attribute the surge in quotes of virtual currencies to the restoration of investors’ interest in them against the backdrop of a positive correction in the US stock market.

The S&P 500 closed above 4,000 points last week, up more than 4% since the middle of the week. According to Igor Pan, a specialist in digital assets of the Finmir marketplace, the influx of capital into the stock market could lead to an increase in the S&P 500 index to the level of 4100 points, and possibly up to 4150 points in the coming week.

In addition, the reason for the positive momentum in the cryptocurrency market, according to Dmitry Machikhin, CEO of the BItOK.org service, was “the emergence of strong Bitcoin buyers.” Arikapital investment strategist Sergey Suverov adds that players could have reacted to the news that MicroStrategy, the largest institutional investor in bitcoin, is ready to purchase BTC for up to $500 million. According to him, “as a result of traditionally high leverage (the use of borrowed funds.— “b”) in the sector, the reversal was accompanied by a massive removal of “short” positions and an even greater rebound in prices. According to Dmitry Machikhin, this is “a good sign that can catalyze a rally in cryptocurrencies lasting four to six weeks.”

Supports the cryptocurrency market and the expectation of the introduction of a new proof-of-stake (PoS) ether mining algorithm.

According to Sergey Suverov, American regulators clearly give priority to this mechanism, based on its much lower energy consumption compared to proof-of-work (PoW). In addition to improving energy efficiency and speed of settlements, the new protocol allows increasing the degree of decentralization.

In addition, according to Igor Pan, “investors like the idea of ​​being able to earn 6% every year on their available ETH” thanks to staking (storing cryptocurrency on crypto wallets to ensure support for all operations on the blockchain). The new algorithm is expected to be launched next week.

All these events can support the bullish game in the crypto market. According to Mr. Pan, in the upcoming trading sessions, the price of BTC may rise to $22-22.5 thousand, the cost of ETH – up to $1.85-2 thousand. up to $2.8–3 thousand

Nevertheless, experts are still less optimistic about the situation on the cryptocurrency market in the longer term.

Igor Pan even calls the latest rise in cryptocurrency quotes the stock term “dead cat rebound”, when a period of decline is replaced by a sharp rise. According to him, in favor of the “bears” is the ongoing adaptation to the tightening of monetary policies of the financial regulators of the leading countries, which are struggling with high inflation and rising consumer prices.

Chicago Fed President Charles Evans said last week that the Fed “may very well” raise rates by 75 bp this month. Now the Fed rate is at the level of 2.25-2.5%. According to CME futures, the probability of raising the rate to 3-3.25% at the end of September is estimated by investors at more than 90%. Also at the end of last week, the ECB for the first time raised the main refinancing rate by 0.75 percentage points at once, to 1.25%. Reuters, citing its sources, reports a possible rate hike above 2%.

Experts believe that with a high probability, the bottom for the cryptocurrency stock market has not yet been reached. “Globally, there is nothing positive for risk-on (going into risk.— “b”) assets are still not visible on the horizon,” Dmitry Machikhin believes. According to Sergey Suverov, “in the context of unbridled inflation, it is impossible to exclude further tightening of the Fed’s rhetoric, which could cause another wave of sales in the markets of high-risk assets, which include cryptocurrencies.”

Vitaly Gaidaev, Dmitry Ladygin