Why Ethereum, Bitcoin, and Cardano are rocketing higher today

Could the party be getting started once again?

| More on:
Three rockets heading to space

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Today's moves in equity and cryptocurrency markets are providing a nice bout of bullish sentiment for investors who have been beaten down for most of 2022. As of 3 p.m. ET on Tuesday, Ethereum (CRYPTO: ETH), Bitcoin (CRYPTO: BTC), and Cardano (CRYPTO: ADA) had surged 11.7%, 4.9%, and 13.3%, respectively, over the past 24 hours. These moves come amid expectations that the Federal Reserve could tone down its pace of interest rate hikes sooner than expected, as well as some stronger-than-expected earnings reports from large-cap companies this week.   

One of the key drivers of expectations that the Fed could slow down its rate increases came out of new data released today with updated August numbers in the S&P CoreLogic Case-Shiller Home Price Index. While home prices accelerated 13% in August year over year, this increase was down considerably from the 15.6% rate seen in July. Accordingly, this was the steepest deceleration we've seen in the Case-Shiller index since its inception.

And data from the Case-Shiller 20-City index provided an even clearer picture of where prices are headed in major metropolitan areas. This metric showed a 1.6% decline in the top 20 major U.S. markets on a month-over-month basis.

Other positive earnings data from global companies such as Coca-Cola and GM this week stoked hopes that the economy could achieve a potential soft landing, allowing for lower interest rates in the intermediate term.

So what

Today's incredible moves higher in major cryptocurrencies signal the kind of high-correlation, higher-beta moves the crypto sector has been making this year. In general, most of the same macro factors driving stocks mostly lower this year have had a similar outsize effect on digital assets. Accordingly, as a higher-risk proxy for stocks, digital currencies often see larger gains during up days in the stock market.

Should interest rates begin to decline later this year, some analysts believe that we could see an accelerated rally into 2023. That said, it remains unclear if the Cosumer Price Index and Producer Price Index will corroborate with the lagging data we're seeing out of the housing market. 

Now what

Long-term investors looking to call a bottom have been unsuccessful in doing so thus far this year. Most bounces have been met with lower lows, suggesting true capitulation in high-risk assets has not been seen today. In some respects, today's surge in major cryptos could be a signal that speculative capital hasn't been fully washed out yet. Thus, perhaps today's rally is a bearish near-term signal for the market.

But it's entirely possible the market is right in its assessment that rates can't rise much further. The economy has undoubtedly slowed in certain core areas, such as housing. And given the lag in data that's been problematic in leading the Fed to be late to react to the initial surge in inflation, it's possible prices have come down more than the data suggest.

My take is that it's probably too early to say the selling pressure is over for crypto in general. However, these three high-quality tokens could be among the best performers when the market does turn bullish once again. Thus, now could be an interesting time to consider easing into positions as the market searches for a bottom. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Chris MacDonald has positions in Ethereum. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin, Cardano, and Ethereum. The Motley Fool Australia owns and has recommended Bitcoin and Ethereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

A man looking at his laptop and thinking.
International Stock News

With Warren Buffett stepping down as CEO, will Berkshire Hathaway sell Apple stock?

Or will it find something else to invest in? Let's take a look.

Read more »

Man on his laptop standing next to data centres.
International Stock News

History says now is the time to buy Nvidia stock

History doesn't normally repeat itself, but it often rhymes.

Read more »

Woman relaxing and using her Apple device
International Stock News

16 words from Warren Buffett that should have Apple stock investors excited

Let's see what Buffett had to say and what it means for investors.

Read more »

Legendary share market investing expert and owner of Berkshire Hathaway Warren Buffett
International Stock News

Prediction: Warren Buffett may be shifting out of his Berkshire Hathaway CEO role, but he's not done investing

Let's take a closer look at what may be ahead.

Read more »

A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her
International Stock News

Here's why I'm not too worried for Alphabet despite Apple's potential new AI-powered Safari search

Investors panicked when the possibility was floated, but take a step back and look at the bigger picture.

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
International Stock News

Should you buy Nvidia before May 19?

Nvidia has been firing on all cylinders, and we may have a chance to hear more about this top AI…

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
International Stock News

Should investors be concerned about Berkshire Hathaway's record $348 billion cash position and third consecutive quarter of no stock buybacks?

Here's what the treasure trove of cash and lack of buybacks signal, and if Berkshire is still an excellent value…

Read more »

Woman in business suit holds both hands out with a question mark above each hand.
International Stock News

AMD vs. Nvidia: Which artificial intelligence stock should you buy on the dip?

Which of these two chip stocks is the better option right now?

Read more »