As groupings, financial markets have a tendency to overreact to the latest news affecting their components. This trend is especially acute with cryptocurrencies, as they are — justifiably — considered to be inherently volatile investments.
This overreaction to news and head-spinning volatility were strongly in evidence last week with cryptocurrencies, as softer-than-expected jobs growth renewed fears of economic weakness in our near future.
But many crypto-heads felt that their fellow investors went too far in their sell-offs, and started considering the sector as a whole to be oversold. Since the weekend, they’ve been piling in to many coins and tokens, with popular altcoin Avalanche (CRYPTO: AVAX) rising almost 15% since 4 p.m. ET last Friday, Sui (CRYPTO: SUI) following close behind with a nearly 14% pop, and Stacks (CRYPTO: STX) also posting a double-digit gain, at just under 13%.
Those investors came into a trading week that, so far, has been bereft of sentiment-draining news affecting cryptocurrencies. We’re also heading into the next Federal Open Market committee (FOMC) meeting next week, in which the Federal Reserve (Fed) body should determine whether it’ll modify its key interest rates.
A rate cut has been expected for some time now, since inflation data from the federal government indicated that the economic boogeyman might be getting tamer. Prevailing monetary theory has it that higher rates both curb consumer spending and inspire investors to lock in their money with reliable assets that pay a relatively high return (in the form of bond coupons, for example). Conversely, lower rates lead to busier spending and increase the hunger for more risky investments.
The FOMC meeting is coming up soon — it starts next Wednesday. It’s clear that hopeful crypto investors are looking forward to that, and a very possible rate decrease, rather than glancing worriedly back at the discouraging jobs data.
Another bit of news likely affecting crypto sentiment for the better was a new analyst take on one of the most crucial equipment suppliers to the industry: graphics processing unit (GPU) maker Nvidia. On Monday, Citigroup‘s Atif Malik reiterated his very bullish take on the stock, buttressed by a set of solid growth figures.
According to Malik, citing graphics segment data from Mercury Research, on a quarter-over-quarter basis, Nvidia showed that the company’s market share in terms of units grew by 50 basis points to 90.5% in the gaming segment. That’s well above the trailing-three-year average of 82%. The company also managed to grow unit shipments of GPUs to its data center customers by 19% sequentially to reach almost 93% market share.
Powerful GPUs are essential in the mining of some of the top cryptos on the scene, such as longtime No. 1 Bitcoin. Growth in sales of the technology come from numerous sources, but since cryptocurrency production is an important one, this is quite possibly an indication of strong, sustainable mining demand.
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Eric Volkman has positions in Bitcoin. The Motley Fool has positions in and recommends Avalanche, Bitcoin, Nvidia, and SUI. The Motley Fool has a disclosure policy.
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