Week in Review: Bitcoin and Ethereum Lead Crypto Market Higher as Goldman Sachs Embraces Digital Assets

Long-term holders of digital currencies were rewarded again this week, as bitcoin and Ethereum led a broad market recovery past $450 billion. Gains were partly driven by positive speculation over Goldman Sachs’ entry into the space as an institutional money maker, which likely puts more pressure on Wall Street banks to follow suit.

Meanwhile, equities rounded out a turbulent week on a positive note, as anticipated volatility briefly fell to its lowest level since January.

Cryptocurrency Recovery Takes Root

The cryptocurrency market rallied more than 12% this week, as bitcoin broke above $9,700 and Ethereum approached $800. Both digital currencies grew in market cap as investors continued to anticipate broader institutional adoption of digital assets.

Ethereum prices surged nearly 20% this week to $778 a coin despite reports that federal regulators were conducting a deeper investigation into the digital asset. Hacked reported Tuesday that the U.S. Securities and Exchange Commission (SEC) was researching Ethereum and other crypto assets to determine if they meet the standard definition of a security.

Bitcoin’s gains were far less dramatic this week, though signs of price stability gave investors confidence that the cryptocurrency had entered a long-term recovery phase. Bitcoin rose by about $400 over the past seven days, having established its narrowest trading range in nearly six months. At the time of writing, bitcoin was valued at $9,671.

The crypto market peaked near $461 billion on Friday, its highest since early March. At the time of writing, the total market was worth roughly $456 billion, according to CoinMarketCap.

Stocks Recover

Equity markets ended the week on a positive note, as shares of Apple Inc. (AAPL) reached all-time highs and the broader technology sector followed suit.

The world’s most valuable company reported better than expected earnings this week even as sales of its flagship iPhone product fell.

Wall Street’s major indexes reversed weekly losses following a strong Friday session. The S&P 500 Index, Dow Jones Industrial Average and Nasdaq Composite Index rose between 1.3% and 1.7% on Friday.

The CBOE Volatility Index, commonly known as the VIX, briefly fell below 11.00 for the first time since January. The VIX, which historically trades around 20, settled down 7.1% at 14.77.

Corporate earnings continue to deliver positive results, with the S&P 500 Index now poised for its strongest quarter since 2010. As of Friday, blended earnings for S&P 500 companies had grown 24.2% in the first quarter based on 81% of firms reporting.

Nonfarm Payrolls Disappoint

U.S. employers added 164,000 workers to payrolls last month, undershooting estimates by 31,000, the Department of Labor reported Friday.

Softer job creation was offset by a bigger than expected fall in unemployment, which many analysts said was evidence of a stronger labor market. However, a closer evaluation of the numbers reveals that the decline in the unemployment rate was caused by 236,000 workforce exits.

In other words, the number of Americans searching for work fell during April.

Still, a jobless rate of 3.9% is the lowest in nearly two decades.

Average hourly earnings, a proxy for wage inflation, rose just 0.1% month-on-month and 2.6% annually, official data showed. Both were lower than expected.

The Week Ahead

Cryptocurrencies are edging closer to $500 billion thanks to a broad relief rally led by bitcoin and the major altcoins. While a repeat performance of April is unlikely, strong fundamentals and favorable developments on the institutional front could generate even more interest in digital assets.

The winding down of corporate earnings season could spell trouble for stock markets as investors shift their focus to economic data and monetary policy. The Federal Reserve has made it abundantly clear that it intends to raise interest rates steadily over the next three years as inflation and economic growth approach, and possibly exceed, their targets.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi