Week in Review: Crypto Market Loses Steam While Stocks Finish Strong

The cryptocurrency market pivoted lower this week, as bitcoin and most major altcoins experienced a broad correction. Though experts have struggled to pin-point an exact reason for the decline, profit-taking and declining trade volumes appear to be at least partly responsible.

Meanwhile, U.S. stocks finished a rocky week on a positive note as investors turned their attention to Jerome Powell’s first Congressional update next week.

Cryptocurrencies Face Broad Reversal

It was a volatile week for cryptocurrencies, as bitcoin and the major altcoins struggled to build off the previous week’s momentous rally. The total market cap for all cryptocurrencies bottomed at $417.6 billion on Thursday as trade volumes also dipped. The market recovered near $443 billion on Friday, but was still down 7.8% for the week and 14.6% from last Saturday’s high of $518.1 billion.

Bitcoin had an especially volatile week as profit-taking took prices from a high near $11,800 to a low of around $9,650. At the time of writing, the cryptocurrency was trading at $10,040.

Litecoin was also hit by turbulence this week, with prices fluctuating between five-week highs and nine-day lows. The world’s fifth-largest cryptocurrency briefly traded above $300 on Tuesday before falling more than $120 over the next three days. At the time of writing, Litecoin was valued at $204.13.

Prior to the latest reversal, Litecoin was riding a wave of momentum stemming from the announcement of the LitePay payment network. Prices also received a boost following a hard fork of the Litecoin blockchain last Sunday. The fork, which was unaffiliated with the original Litecoin, produced a new cryptocurrency called Litecoin Cash (LCC).

Stocks End on a High Note

U.S. stocks ended a rocky week on a positive note Friday, with the S&P 500 and Dow Jones Industrial Average rallying for a second straight week.

The large-cap S&P 500 Index climbed 1.6% to close at 2,747.30 on Friday. For the week, the index added 0.5%.

The Dow Jones Industrial Average climbed 357.51 points, or 1.4%, to 25,309.99. The blue-chip average ended the week on a gain of 0.4%.

A measure of implied volatility known as the CBOE VIX declined sharply in the final session of the week, closing at its lowest level since Feb. 1. Wall Street’s preferred measure of investor anxiety declined 11.9% to finish at 16.49, on a scale of 1-100 where 20 represents the historic mean. Vol has now fallen 55% from its multi-year settlement high of 37.32 on Feb. 5.

Fed Minutes Point to March Rate Hike

The minutes of the Federal Reserve’s most recent policy meeting gave a strong indication that interest rates could rise faster than previously expected. In deciding to hold interest rates steady last month, Fed officials said stronger economic growth and stronger inflation may require a quicker response from policymakers.

“A majority of participants noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate,” the summary of the Jan. 30-31 Federal Open Market Committee (FOMC) meeting revealed Wednesday.

“Almost all participants” saw inflation moving up to the Fed’s 2 percent inflation goal over the “medium term” as growth “remained above trend and the labor market stayed strong.”

The FOMC is planning to hold its next policy meeting on Mar. 20-21, where the likelihood of a rate hike is 83.1%, according to CME Group’s FedWatch Tool.

The Week Ahead

Following a series of volatile swings, the cryptocurrency market will be looking for new direction this week. Even with the latest reversal, the technical outlook remains favorable, with the marketing recording bottom-to-top gains of up to 15%.

In economic data, a series of GDP reports will make headlines next week, with the Eurozone, United States and Canada expected to produce Q4 results.

On the policy front, Federal Reserve Chairman Jerome Powell will deliver his first congressional testimony to the House Financial Services Committee. The semiannual policy address is scheduled for Tuesday at 10:00 a.m. ET. On Thursday, Powell will testify before the Senate Banking Committee.

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