Crypto is an ever-evolving market that is seen to change by the minute. Altcoins are not an exception, with some of them recording over 20% price increases in the last seven days. The abrupt spike in value can be attributed to several reasons such as inflation, increased demand for these coins, following Bitcoin’s lead, interest rates, and the fact that FTX has recovered ‘over $5B’ in assets.
Inflation has been dropping, as highlighted by the Consumer Price Index (CPI) data, and it was negative from November to December 2022. Furthermore, the US Labor Department published that yearly inflation in the United States was 6.5% as of the end of December, plunging from 7.1% in November. This was the slowest rate of growth in nearly 12 months and was the sixth straight month where the rate had dropped.
The US Federal Reserve’s decisions on interest rate hikes seem to have a huge effect on the crypto markets. With the market valued at around $1 trillion, cryptos are majorly affected by monetary policies, and investors normally keep a keen eye on them.
Authorities and regulators in the US have been striving relentlessly to stabilize prices since 2021 when the economy eventually started to recover from pandemic restrictions. These conditions had pushed businesses faced with shortages and increased expenses started to raise prices in response.
With the global economy facing the threat of a recession, investors are seeking to diversify their portfolios. Altcoins are viable options for some of these investors, and increasing demand might be fueling the Bitcoin and altcoin comebacks in January 2023.
Related: What are Altcoins?
There is reason to be more optimistic about the sector’s future. In general, crypto is relatively new, and downturns – even the extensive ones – are highly common. By riding out the storm regardless of its magnitude and waiting until the recovery period, you may enjoy some lucrative returns.
Nonetheless, it is highly important to select the right investments. Most of the cryptocurrencies may not survive some of the severe drops, and investing in the wrong places may be quite expensive. While there are never any assurances in crypto due to its volatility, the altcoins and Bitcoin may help you diversify your investment portfolio.
Here is what is pushing the altcoin market back up currently:
US Inflation Drops To Its Lowest In Over A Year
Inflation has been dropping, as highlighted by the Consumer Price Index (CPI), and it was negative between November and December 2022. The United States Labor Department reported that yearly inflation in the United States was 6.5% as of the end of December, plunging from 7.1% in November. That was recorded as the slowest rate of growth in nearly a year, and it was the sixth straight month where the rate had dropped.
Generally, the price of gasoline dropped and was responsible for the overall drop of 0.1% in market prices over the last month. President Joe Biden praised these findings in his remarks earlier this month. He said:
“It’s obvious that we’re making progress. In the end, it’s a relief for consumers and financial stability for families.”
Yet, many experts warned that the lower energy prices were not trickling down to the other goods as quickly as projected. As an example, clothing costs increased by around 0.5% from November to December and by around 2.9% from a year ago. Capital Economics’ senior North American economist, Paul Alsworth, recently said:
“Goods deflation isn’t extending out quite as swiftly as we predicted.”
The Federal Reserve’s Fight Against Inflation
The United States Federal Reserve’s decisions on interest rate changes have a huge impact on the crypto markets, mainly Bitcoin. Being the most valuable crypto in the world currently, Bitcoin is majorly impacted by such decisions and investors mostly keep a keen eye on them.
Authorities and regulators in the US have been striving to stabilize prices since 2021, when the economy eventually started to rebound from the COVID-19 lockdowns that had crushed it and when businesses encountered shortages in resources and growing expenses started to increase prices in response.
Fed poised to rate-hike downshift after cool inflation data
The US Federal Reserve is planning smaller interest-rate hikes after a further cooling in US inflation, although it will likely continue to hike rates until price pressures show more clear signs of slowing, pic.twitter.com/3Nx8zqja59
— Trigger🐐😇🦅(No Confusion) (@TriggerMlm) January 14, 2023
Notably, the US policymakers took action by increasing interest rates more aggressively than they have in decades aiming to push inflation back to the 2% level the central bank considers acceptable. Jerome Powell, chairman of the Federal Reserve Board, said in December 2022 that the Fed will start to move less aggressively to review the impacts of its recent actions on the US economy.
The Federal Reserve might see the drop in the inflation rate as evidence that the aggressive interest rate hikes are having the desired effect. However, Fed Chair Jerome Powell has not shown any signs of wishing to curtail rate hikes a lot up to when inflation drops towards 2%.
Nonetheless, with a plunge in inflation, the perception of a Fed fund rate hike weakens, making the US dollar fall and the crypto market surge.
FTX Recouped Over $5B In Assets After Bankruptcy, Attorney Said
In a surprising and interesting turn of events, the FTX Group has already reclaimed more than $5 billion in assets after its bankruptcy. Based on a recent statement from their lead attorney, the unexpected windfall was made possible via the firm’s successful negotiations with creditors.
These assets will assist in keeping the firm afloat and better protect investors as they continue navigating through turbulent times. The firm will also use the money to continue with its efforts to protect the environment and push down costs for clients.
Thus, the news of recovery is boosting investors’ confidence and driving an uptrend in the FTT market.
The Ripple vs SEC Case
The relationship between XRP tokens and Ripple Labs has been quite controversial over the years. While there is a lot of evidence through older documents that XRP was also called Ripple in the past, since the XRP initiative in 2018, the company has placed a lot of emphasis on the fact that the token is only known as XRP.
Specifically, the company’s huge XRP holdings in escrow accounts have been the focus of controversy. By December 2017, Ripple developed 55 escrow accounts, with each of them holding 1 billion XRP. As of January 2023, the company still owns 43.3 billion XRP of all the 100 billion pre-mined XRP.
While Ripple set up these escrow accounts to offer transparency and publishes extensive quarterly reports, a Twitter researcher by the name “Mr. Huber” has made a ‘finding’ that sheds lots of light on another angle of Ripple’s impact on the price of XRP.
The prices of XRP have increased considerably in recent weeks. Notably, the price spike came amid the drop in the crypto market and the reaction to the latest XRP lawsuit news.
The legal battle between Ripple and the US Securities and Exchange Commission (SEC) is yet to get the much-expected Summary Judgment. Nevertheless, the latest filings show that both parties requested the court to set a deadline for sealing the Summary Judgment Materials.
With Ripple seemingly tipped to win the case, the price of XRP has been on a rise with massive upside potential expected and this has helped drive an altcoin bulls’ comeback.
Dogecoin (DOGE) Pumps Higher, Are Meme Coins Back?
Dogecoin was launched in 2013 as the first meme coin in a decentralized payment system. For several years, DOGE maintained a low profile before the idea caught the attention of crypto investors during the 2020 bull market. Later, some famous individuals started to tweet frequently about Dogecoin, including Tesla CEO Elon Musk and Mark Cuban, which drove the value of the token higher.
Musk’s acquisition of Twitter had a bullish impact on DOGE markets, pushing them significantly higher over recent weeks. Although the general crypto market needs to rise significantly for DOGE to reach $1, analysts believe that Dogecoin helped pull the entire memecoin market up which, in turn, has helped altcoins to stage a comeback.
The price of Dogecoin has been exploding lately with most of its support coming from the strong support of its community. Hence, a new surge might signal a new interest in memecoin and increasing demand from investors.
In the past 12 months, the value of Dogecoin has been on a rollercoaster. The token dropped extensively to the bottom at $0.04911 in June 2022 but has gained twice as much since then.
So far in 2023, Dogecoin has gained 31.2% – showing that meme coins are back up into the game. Although projects like Snowfall Protocol (SNW) remain investors’ and analysts’ favorite choice, meme coins have enabled investors to profit from their favorite tokenized memes.
Is It The Right Time To Invest In Altcoins?
Despite all the capabilities and potential, cryptocurrency is still risky and highly volatile. Currently, most of the altcoins are mostly speculative and nobody can certify how they will end up in the coming years. Nonetheless, there is still a possibility that the entire sector could implode, and even the strongest investments may not survive.
Before buying, then always ensure that you are willing to tolerate the higher risk levels that come with this market. Experts say that you should never invest any of your money that you are not ready or willing to lose. Also, double-check that the rest of the portfolio is diversified to limit losses whenever they arise.
Not all altcoins will be the right investments for everyone. Moreover, there are no assurances that they will succeed in the long term. However, Bitcoin and Ethereum have some of the most significant potentials of any cryptos for now. Hence, they provide some reasons to be optimistic about the future.