The cryptocurrency market experienced a turbulent week, with price fluctuations leaving most major tokens with little overall movement. As of 4 p.m. ET, Bitcoin (CRYPTO: BTC) rose by 5.6% in the past 24 hours but registered only a modest 0.9% gain over the last seven days. Similarly, Ethereum (CRYPTO: ETH) saw a 3.9% daily increase but climbed just 1.2% over the week. Dogecoin (CRYPTO: DOGE), another popular cryptocurrency, surged by 6.3% today but posted only a 0.7% rise since last week.
Inflation Data Sparks Market Reactions
The market volatility was largely driven by inflation data released on Thursday. Consumer prices increased by 2.4% over the past year, but core inflation, excluding items like energy, climbed by 3.3%. This uptick in core inflation caused concern that the Federal Reserve might not cut interest rates as aggressively as many had hoped in 2024.
Despite being promoted as an alternative asset class uncorrelated with traditional markets, cryptocurrencies—especially Bitcoin and Ethereum—have closely followed the trajectory of growth stocks in recent years. Both asset types are highly sensitive to shifts in economic growth and interest rate expectations.
The higher-than-anticipated inflation numbers are particularly significant because inflation was a key driver of the Federal Reserve’s rate hikes, which began in 2022 and hurt growth stocks and cryptocurrencies alike. Investors had anticipated a potential decline in interest rates following last month’s adjustment, but the latest data has cast doubt on that outlook, particularly since the Fed aims to keep inflation at 2%.
Thursday’s inflation report triggered a selloff in the crypto market, which partially reversed on Friday as traders reassessed the situation, viewing the initial reaction as potentially excessive.
Legal Challenges with the SEC
In addition to inflation concerns, the crypto industry faced legal challenges this week. After receiving a Wells Notice from the U.S. Securities and Exchange Commission (SEC) in August—indicating potential enforcement action—Crypto.com has filed a lawsuit against the SEC, accusing the agency of overstepping its authority and not adhering to proper regulatory procedures.
This move comes in the wake of several recent legal victories for cryptocurrency exchanges, as well as blockchain and token developers. Notably, major tokens like Solana and ADA were named as securities in the SEC’s original Wells Notice.
Volatility and the Future of Crypto
The key theme this week was volatility, largely fueled by economic indicators that typically affect stock markets. However, a larger trend may be working against the long-term viability of mainstream cryptocurrencies.
Blockchain innovation and usage are increasingly relying on stablecoins—cryptocurrencies designed to maintain a stable value—rather than more volatile tokens like Bitcoin and Ethereum. According to a stablecoin tracker from Visa, $1.6 trillion worth of transactions were processed via stablecoins over the last 30 days alone.
As blockchain technology evolves and stablecoins become the dominant medium for transactions, popular tokens like Bitcoin, Ethereum, and Dogecoin could lose relevance as investment assets. With these tokens increasingly viewed as speculative trading instruments, their utility in the broader financial system may diminish over time.
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