ETH, SOL exhibit heightened price sensitivity amid wider market caution, Coinbase analyst says

Crypto market participants are expected to exhibit continued caution, with ether and solana exhibiting higher betas, a Coinbase analyst said. According to Thursday's Coinbase Weekly report, the altcoins have been exhibiting increased sensitivity to market movements, and they may react more strongly to changes in broader crypto market movements.

"We expect market players to remain cautious about their risk exposure in the weeks ahead, with both ETH and SOL currently showing greater sensitivity to the overall crypto market with higher betas of around 0.85 and 0.83, respectively," Coinbase analyst David Duong said. The Coinbase analyst noted that solana and ether have been the primary "beta plays" in the crypto market, exhibiting greater volatility than the overall market.

Crypto market remains subdued despite cooler inflation reading

According to 21Shares Head of Strategy and Business Development Eliézer Ndinga, the latest inflation data, showing a cooling but stable inflation environment, is critical for the crypto market, particularly in the wake of last week's broader market downturn. However, the largest cryptocurrency by market capitalization has failed to be boosted by this week's inflation reading, trending lower, whereas stock indices traded higher. Inflation figures out Wednesday showed that U.S. year-on-year core consumer prices in July rose at its slowest pace since 2021. 

"With inflation coming in as expected, the likelihood of a smaller 25bps rate cut by the Fed has increased, which may support risk-on assets. However, bitcoin and ether reacted negatively in the immediate aftermath, likely due to hopes of a more dovish rate cut," Ndinga told The Block.

The CME FedWatch tool indicates that interest rate traders currently assign a 62.5% probability to a 25 basis-point cut by the Fed next month and a 37.5% probability to a 50 basis-point cut at the Federal Open Market Committee (FOMC) meeting on September 18. Rate cuts generally lead to more liquidity in the markets, thereby encouraging investors to seek higher returns in risk-on assets, like bitcoin and ether.

Despite the downturn, BRN analyst Valentin Fournier said the current dip is a strategic buying opportunity and expects bitcoin to rebound and target a $65,000 to $68,000 price range in the near term, driven by upcoming rate cuts and easing pressure on risk assets. "This minor dip is good timing to keep increasing your exposure to both cryptocurrencies as bigger rallies are set to happen before the end of the year," Fournier told The Block.

Slump in daily spot market exchange volume

The seven-day moving average of bitcoin exchange volume has fallen from $19.62 billion to $11.5 billion in the past week, according to The Block's Data Dashboard.

The seven-day moving average of total spot market volume across major cryptocurrency exchanges, including Binance and Coinbase, has also fallen from over $60 billion last Thursday to a current reading of just over $36 billion, according to data from The Block. 

The spike in volume could be attributed to the market shock, triggered by the unwind of Japanese yen-funded carry trades, that "acted as a drag across nearly all markets," according to Thursday's Crypto Weekly report.