Why Altcoins Surged Ahead by Double Digits This Week

As we entered the last weeks of summer, the crypto market began to heat up as if it was mid-July. Numerous news developments and trends that have powered rallies in digital coins and tokens in the past started to boost the market again. As a result, many were rising at comfortable, double-digit rates over the course of this week.

There was plenty of variety in that surge, too, data compiled by S&P Global Market Intelligence reveal. Smart contract platform anchor coin Tron (TRX 4.88%) was up by almost 19% across the period, with utility token Chainlink (LINK 2.94%) not far behind with a 17% gain. Everything-but-the-kitchen-sink chain BNB‘s (BNB -1.02%) native cryptocurrency advanced by nearly 13%, and holders of meme crypto Pepe (PEPE 9.90%) were surely pleased with its almost 18% rise.

A very pleasant late summer bounce-back

Cryptocurrencies experienced a slide — well, let’s call it a “correction” — at the beginning of this month. U.S. economic data releases brought on fears of a looming recession, and that kind of environment isn’t good for most financial assets. It’s especially threatening for assets considered to be high risk, and even after all this time most cryptos (save for possibly Bitcoin and, at a stretch, Ethereum) are slotted into this category.

Compounding this growing fear, the Federal Reserve (Fed) resolutely stuck to its policy of leaving interest rates unchanged. All things being equal, lower rates tend to encourage market players to chase riskier investments, hence the crypto world’s thirst for a Fed rate cut or several.

The situation changed notably in the middle of the month. Last week the inflation readout showed that the current macroeconomic bogeyman seemed to be fading considerably. The year-over-year rise in the consumer price index (CPI) was 2.9%, which was the first time it’s landed below 3% since the pandemic month of March 2021. That figure was also well below many economists’ projections.

That good news was compounded by this week’s analysis from influential research organization the Conference Board. Its leading economic indicators (LEI), considered by many to be reliable signals of potential economic distress, fell by 2.1% over the six months ending in July. This compared favorably to the drop of 3.1% in the preceding half-year stretch. According to the board, this sort of trajectory “no longer signals recession ahead.” While economic growth is expected to slow, this shouldn’t be as drastic as some worry it might be.

It’s almost time for cuts!

Meanwhile, on Friday crypto investors — and the rest of the financial world — received their surest signal yet that the Fed is about to grab the scissors. Chair Jerome Powell talked about rate cuts as if they were an event soon to be realized, rather than a hazy possibility or rank speculation.

“The time has come for policy to adjust,” he said in his keynote speech at the organization’s annual retreat. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”