“Crypto winter” gives truce, but optimism may be premature, analysts say

Is the crypto winter finally over? (And right in the scorching heat of the northern hemisphere summer?)

Bitcoin prices stabilized around the $23,000 to $24,000 level after falling below $20,000 in June.

The prices of Ethereum and other leading digital currencies have also risen in the last couple of months, leading to hopes that this nascent market may have already bottomed out and is now growing again.

But optimism can be premature and fleeting. Companies with direct ties to the cryptocurrency landscape continue to struggle.

Coinbase reported a second-quarter loss after Tuesday’s close.

This follows Monday’s revenue alert from Nvidia (NVDA), whose graphics cards are a key component in many bitcoin mining rigs.

With all this in mind, some experts think that bitcoin could be stuck in a narrow range for the foreseeable future. So yes, investors may not have to fear that prices will drop much further. But a big rally might not be on the cards either.

“Bitcoin treads on water,” Martin Hiesboeck, head of blockchain and cryptocurrency research at Uphold, a cryptocurrency wallet company, wrote in a recent report. “The market is weak.”

Hiesboeck added, however, that it is encouraging to see that “every downward move is immediately met with large orders” to buy from large institutional investors.

But he expects the dizzying volatility that has become a hallmark of cryptocurrency trading to continue.

“Many investors are concerned that the macroeconomic outlook will not improve anytime soon, so they sell every price increase. At the same time, institutions and savvy investors seem to think that bitcoin has formed a bottom and continues to accumulate,” he said, adding that “such moves often lead to excessive price action.”

This kind of volatility could finally ease a bit as more traditional Wall Street companies enter the cryptocurrency market. Bitcoin bulls point out that a recent deal between Coinbase and money management giant BlackRock is a promising sign.

“The partnership between BlackRock and Coinbase is a big deal,” Jack Cameron, co-founder of Luna Market, a metaverse advertising and technology company, said in an email.

Cameron added that because “there is still a stigma” associated with bitcoin, having more companies like BlackRock diving into the digital asset sector is good news.

“The more institutional money that enters the space, the better it will be for all cryptocurrency holders,” he wrote.

That might be true. But in the short term, investors may be waiting to see what happens on the inflation front.

Bitcoin, despite the hype from proponents about being digital gold, turned out not to be a well-performing asset when inflationary pressures are mounting and interest rates are rising.

Therefore, investors may first need to see some signs that inflationary pressures are finally starting to peak before deciding to raise bitcoin prices further.

Traders will have a better sense of this after the US July inflation results.

“Inflation is what killed bitcoin late last year, and if price pressures are showing significant signs of easing, bitcoin may be able to break out of its recent trading range,” Edward Moya, senior market analyst for the Americas from OANDA, an exchange company. company, said in a report.