Cryptocurrencies have bounced back in style this year after a poor show in the second half of 2022. The Federal Reserve’s aggressive interest rate hike policy, with a 500 basis-point increase since March 2022, to combat multi-decade high inflation, had an impact on the cryptocurrency market.
High interest rates negatively impact growth assets such as technology stocks, consumer discretionary stocks, and cryptocurrencies. The monetary tightening policy also raised fears that the economy might slip into a recession this year. Besides, a series of unfortunate events like a major fraud resulting in FTX going bankrupt and the Terra Luna crash also raised doubts in the minds of market participants about the future of cryptocurrencies.
However, favorable macroeconomic conditions have seen cryptocurrencies, including Bitcoin (BTC), making a solid rebound this year. Earlier this month, the Bitcoin price surged to a 13-month high of $31,500, driven by soaring demand from institutional investors.
Bitcoin price has since hovered around the $30,000 mark. On Jul 19, it traded at $29,850. Experts had predicted that Bitcoin would rebound and rally this year, gathering momentum in the second half as macroeconomic conditions improve.
It seems the predictions are matching, with the latest example being a decline in inflation. Although inflation is still elevated from the Fed’s target level of 2%, it has eased considerably over the past year.
The consumer price index (CPI) and the producer price index (PPI) reading both reflected a decline in inflation in June. CPI increased a modest 0.2% month over month in June. Year over year, CPI rose 3% in June compared to 4% in May, its lowest level since March 2021.
PPI increased just 0.1% year over year in June. Slowing inflation has compelled the Fed to pause its interest rate hike in June for the first time since March 2022.
Although the Fed has indicated that two more interest rate hikes would be required this year, the impressive June inflation data has raised optimism that the central bank may soon end its monetary tightening cycle. This definitely bodes well for Bitcoin and the overall crypto market.
Stocks to Watch
Stronghold Digital Mining, Inc. SDIG is a vertically integrated Bitcoin mining company. SDIG focuses on mining Bitcoin in the United States.
Stronghold Digital Mining’s expected earnings growth rate for next year is 92.7%. Shares of SDIG have gained 91.8% in the past 30 days. Stronghold Digital Mining presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bitfarms Ltd. BITF is a Bitcoin mining company. BITF provides vertically integrated mining operations with onsite technical repair, proprietary data analytics, and company-owned electrical engineering and installation services to deliver operational performance and uptime.
Bitfarms’ expected earnings growth rate for the current year is 86.1%. Shares of BITF have gained 53.6% in the past 30 days. BITF presently carries a Zacks Rank #3 (Hold).
Hut 8 Mining Corp. HUT is a cryptocurrency mining company based in North America. HUT offers computing power to mining pools and receives digital assets in return. The company caters to commercial clients in diverse sectors such as finance, healthcare and government, as well as those involved in digital assets, blockchain, gaming, virtual effects and Web 3.0.
Hut 8 Mining’s expected earnings growth rate for the current year is 50%. Shares of HUT have gained 63.5% in the past 30 days. HUT presently carries a Zacks Rank #2.
Marathon Digital Holdings, Inc. MARA is a digital asset technology company. MARA mines cryptocurrencies, with a focus on the blockchain ecosystem and the generation of digital assets.
Marathon Digital Holdings’ expected earnings growth rate for next year is 350%. Shares of MARA have gained 72.7% in the past 30 days. Marathon Digital Holdings currently carries a Zacks Rank #3.
Marathon Digital Holdings, Inc. (MARA): Free Stock Analysis Report
Hut 8 Mining Corp. (HUT): Free Stock Analysis Report
Bitfarms Ltd. (BITF): Free Stock Analysis Report
Stronghold Digital Mining, Inc. (SDIG): Free Stock Analysis Report
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