Crypto Markets Surge After Inflation Concerns Fade

Cryptocurrency markets bounced back sharply on Friday, following a dip the previous day. Bitcoin (BTC), the largest digital asset by market cap, climbed back to $63,000, shaking off concerns over rising inflation in the U.S. Investors shifted their focus towards upcoming economic announcements from China, set for Saturday, which could further impact the market.

After dropping below $59,000 on Thursday due to concerns over higher-than-expected U.S. inflation data, Bitcoin rebounded by 7%. This surge came despite the general trend earlier in the week where cryptocurrencies tended to lose value during U.S. trading hours. As of Friday, Bitcoin was up by 5.5% over the last 24 hours, surpassing the performance of the CoinDesk 20 Index (CD20), which registered a 4.7% increase.

Altcoins and Stocks Follow Bitcoin’s Lead

Several other major cryptocurrencies, such as Solana (SOL), Avalanche (AVAX), and Render (RNDR), saw gains of between 6% and 8% over the same period. However, not all digital currencies shared the same positive trajectory. Uniswap (UNI), a decentralized exchange token, was the only asset within the CD20 Index that experienced a slight drop, losing some of the ground it had gained on Thursday after announcing plans to launch its own layer-2 network.

The positive trend in cryptocurrencies was mirrored in traditional equity markets. Both the Dow Jones Industrial Average and the S&P 500 closed the week at record highs. Meanwhile, the U.S. dollar, which had strengthened over the previous week, took a pause, with the dollar index remaining just below 103. The dollar’s recent rise was fueled by traders adjusting their expectations for Federal Reserve interest rate cuts, following strong U.S. job reports and inflation data.

In line with the broader market sentiment, stocks connected to the crypto industry also posted solid gains. Bitcoin mining companies, including MARA Holdings, Riot Platforms, and Bitdeer, all saw their stock prices rise by 5%-10%. The cryptocurrency exchange Coinbase (COIN) also benefited from the market upswing, closing the day with a 7% increase. MicroStrategy (MSTR), the largest corporate holder of Bitcoin, jumped 16%, reaching its highest stock price since March 2000. The company’s share price premium relative to its Bitcoin holdings widened to levels not seen since 2021.

Looking Ahead: China’s Fiscal Policy Update

Coinbase analysts David Duong and David Han suggested that macroeconomic factors influencing cryptocurrency prices have shifted, with attention moving away from monetary policy and towards the upcoming U.S. election. However, the next big market mover could be China’s upcoming fiscal policy update, scheduled for early Saturday. Investors are eagerly awaiting signs of financial stimulus that could help revive the struggling Chinese economy, which could have a significant impact on global markets, including digital assets.

The analysts at Coinbase predict that with traditional markets closed during the weekend, traders may turn to crypto as a way to react to China’s announcements. Markus Thielen, founder of 10x Research, also noted that the U.S. economy appears resilient, reducing fears of an impending recession. This stability, according to Thielen, could set the stage for further growth in riskier assets like cryptocurrencies. Thielen believes the market is primed for a major move, and those closely watching developments will be well-positioned to take advantage of it.