How is the crypto market reacting to a stronger dollar?

GB Market Commentary 15/07/2022

by Ben Small

Perhaps surprisingly given this week’s CPI numbers, its been a relatively strong second half to the week for cryptocurrency holders so far with Bitcoin managing to hold its ground above that psychological $20k mark and ETH jumping by as much as 12% in the last 24 hours. DeFi coins have definitely taken centre stage however with AAVE and UNI both posting double digit gains.

This shift came on the back of positive news of testing completed before the big merge expected this august. Indeed, Ethereum’s long awaited switch to a Proof-of-Stake network has been earmarked as a defining moment in time for the crypto space as a whole. Rightly so given the potential scalability it promises to bring. After multiple push backs, this week saw another set of successful testing which is bringing confidence that the timescales are still feasible. It might be worth following these updates as we move closer to August as you could argue another bout of volatility could follow if the next set of testing falls short of expectations.

Interestingly, activity levels remain closely correlated to the wider financial market however. Eyes will have already turned to this afternoon’s Retail sale figures due from the states which may hold extra weight now that it feels likely poor inflation figures were already factored in before Wednesday’s release.

Figures higher than expected here could further reinforce the point for rapid interest rises which in turn would further drive that divide between the greenback and other major currencies around the world. Clearly the markets are still wobbling from the surprising inflation levels posted at the start of this week and might be waiting for respective data from other regions around the world before hedging their bets.

Tuesday’s Average earnings posted by the National Statistics (UK) could be the first to apply pressure to the Bank of England ahead of the potentially pivotal CPI release due Wednesday.