Week in Review: Crypto Rally Fails to Materialize as Bitcoin Plunges to Five-Week Lows

Cryptocurrencies registered yet another down week, as regulatory headwinds and a Google advertising censure weighed on investor sentiment. The market is down a staggering $180 billion from last month’s high, with the technical indicators pointing to further volatility ahead.

Equity markets also failed to rally this week amid fears over a global trade war. Meanwhile, rising inflation and expectations for higher interest rates sent the U.S. dollar to fresh two-week highs as oil slumped on renewed glut risks.

Cryptocurrencies Plunge

The global cryptocurrency market is down 8% this week and 15% from Monday’s high near $400 billion. At the time of writing, the total market cap was $338 billion, according to data provider CoinMarketCap. Valuations bottomed at $309.4 billion earlier this week, the lowest since early February.

All the major crypto assets headed lower, with bitcoin bottoming near $7,600. The world’s first virtual currency is down 5% over the past five days and is now off 27% from this month’s swing high. Bitcoin was last seen trading at $8,521 for a market cap of $144.3 billion.

Ethereum fell double digits this week and fell below $600 for the first time since December. In doing so, ether ended a prolonged period of relative stability where it outperformed the market by a wide margin.

Meanwhile, Ripple’s XRP hit a low near $0.62, capping off its worst performance since the February flash crash.

Although bitcoin’s declines in recent weeks have been well documented, the broad correction has had an even bigger impact on altcoins. Crypto assets not named bitcoin now account for 57.4% of the total market after reaching a high near 68% earlier this year.

Equities Fall on Trade-War Risks

Wall Street failed this week to extend last Friday’s rally that was inspired by much better than expected jobs data. Instead, concerns over a global trade spat dominated the conversation after President Donald Trump signed an order that authorized new tariffs on steel and aluminum products. Notably, Canada and Mexico were excluded from the executive decision as all three sides continued to push for a new NAFTA accord.

All of Wall Street’s major indexes registered losses this week, including the Nasdaq, which posted new record highs on Tuesday. The technology-driven index fell 1% over the previous five days.

The S&P 500 Index and Dow Jones Industrial Average fell more than 1% apiece despite registering gains on Friday. Markets in Europe and Asia also registered weekly declines.

U.S. Dollar Hits Two-Week Highs

In currencies, the U.S. dollar stabilized at two-week highs Friday as economic data continued to support calls for tighter monetary policy. The dollar index (DXY), which tracks the performance of the greenback against a basket of six currencies, settled at 90.21, having gained 0.6% since Tuesday. Among the greenback’s most notable gains was a fresh nine-month high against the Canadian dollar.

Earlier this week, government economists reported a 2.2% annual increase in consumer inflation for February – a figure that runs higher than the Federal Reserve’s target of 2% (however, policymakers prefer the core PCE index when measuring inflation). A separate report on producer prices also showed a 2.8% annual increase in factory-gate prices.

The Week Ahead

If recent history is any indication, crypto investors will once again look to the headlines for inspiration in the coming week. Despite all the FUD-related news, significant progress is being made on the technical side of the blockchain industry. Earlier this week, Lightning Labs announced the release a milestone beta of the Lightning Network, which promises to bring more scalability to bitcoin.

In policy, the U.S. Federal Reserve will hold its next FOMC meeting on Tuesday, where officials are widely expected to raise interest rates. The official statement will be released Wednesday afternoon alongside quarterly economic projections covering GDP, inflation and unemployment.

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