Solana, Other Cryptos Puke After DOJ Announcement – But Are Still Winning On the Week

The crypto market has retraced slightly since Wednesday after the Department of Justice announced an enforcement action against the small Chinese cryptocurrency exchange.

News of the reveal – which was ultimately underwhelming for many in the community – nevertheless dampened a broad rally among digital assets throughout the week. 

Solana’s Volatile Week

Solana (SOL) – which rose as high as $24.75 on Monday – trades at $21.08 at writing time. While down roughly 10% since earlier this week, its still up over 30% since last week, and maintains a $7.7 billion market cap – knocking on Polygon (MATIC)’s door to return into crypto’s top ten largest coins. 

Similarly, “Dogecoin killer” Shiba Inu has risen over 23% in the last 7 days, despite falling by 8.7% within the last 24 hours. Its premiere rival, DOGE, 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 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.