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The cryptocurrency market has retraced slightly since Wednesday after the Department of Justice announced an enforcement action against the cryptocurrency exchange Bitzlato. News of the reveal – which was ultimately underwhelming for many in the community – dampened a broad rally among digital assets throughout the week. 

Solana’s Volatile Week

Solana (SOL-X) – which rose as high as $24.75 on Monday – has been recently seen trading at around $21.10. While down roughly 10% since earlier this week, its still up over 30% since last week, and maintains a near $7.7 billion market cap – knocking on Polygon (MATIC-X)’s door to return into crypto’s top ten largest coins. 

Similarly, “Dogecoin killer” Shiba Inu has risen over 23% in the last seven days, despite falling by 8.7% within the last 24 hours. Its premiere rival, Dogecoin (DOGE-X), is down by roughly the same across the day, but is coming off of relatively modest weekly gains of just 4%.

The week’s rally coincided with the Bureau of Labor Statistics’ Consumer Price Index release last Thursday, reflecting annual CPI inflation of just 6.5% – down from 7.1% in November. The number, which was in line with economists’ expectations, showed that the Federal Reserve’s fight against record-high inflation using a tight monetary policy appears to be paying off. 

Eyes on The Fed

That’s exciting news for crypto and stock investors – whose portfolios largely depend on how cheaply the central bank is willing to supply the economy with money. With inflation being cooled, some suspect the Fed may be prepared to “pivot” and lower interest rates again, ushering in another secular bull market as what was seen in 2020 and 2021. 

Not everyone believes that’s what’s coming, however: JP Morgan analyst David Kelly said last week that he predicts more interest rate hikes to come until May, at which point the Fed will hold its benchmark rate above 5% until the year’s end. 

Rising rates are part of what crushed the crypto industry in 2022, with many industry leaders citing “macroeconomic factors” as justification for mass layoffs throughout the year. It also contributed to a string of bankruptcies that culminated in FTX’s collapse in November, which pulled Bitcoin down to $15,500, and Solana as low as $8.

Arthur Hayes – co-founder of BitMEX – believes the fate of Bitcoin’s short-term price depends on the Fed’s next move. If it continues to tighten, he sees the top cryptocurrency returning to its post-FTX lows.

About the Author

Andrew is a content writer with a passion for Bitcoin. He became familiar with Bitcoin back in 2013, but he began diligently studying blockchain technology and its economic implications in 2017.

Ever since, he’s believed in the network’s power to replace the current global monetary system and provide financial freedom to billions worldwide.

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