Why Bitcoin, Ethereum, and Dogecoin just surged

Today's CPI report turns out to mean a great deal to crypto investors.

| More on:
Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.

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.

Bitcoin (CRYPTO: BTC) has made another notable 24-hour move today, increasing 2.6% since 4 p.m. ET yesterday (as of 1:30 p.m. ET), with Ethereum (CRYPTO: ETH) and Dogecoin (CRYPTO: DOGE) also catching a bid, surging 3.8% and 4.4, respectively, over the same time frame.

These moves have taken Bitcoin back toward the pivotal $100,000 mark, with the world's largest digital asset continuing to hover around this critical level. Ethereum's and Dogecoin's outsize moves make sense in the context of the larger dynamics that are typically at play with respect to these three megacap projects, but let's dive into what's happening beneath the surface and driving such broad momentum in the crypto market as a whole and for these three projects in particular.

It's a macro day, baby

Most of the discussion on traditional media (and social media platforms as well) this morning revolves around today's Consumer Price Index (CPI) report, which came in lower than expected. Core CPI unexpectedly declined one-tenth of 1%, leading to a surge in interest among investors for higher-growth and more speculative asset classes.

Of course, the fact is that overall inflation at 2.9% is still meaningfully higher than the Federal Reserve's target, and there are concerns around Trump's potential tariff plans and how the bond market will continue to react to potentially higher deficits and growth over the next four years.

But with this lower-than-expected core reading, the market now has priced in a greater likelihood of continued interest rate cuts. These implied cuts have put pressure on the U.S. dollar and improved the risk-reward outlook for risk assets, all factors that should benefit megacap cryptocurrencies such as Bitcoin (which is more tethered to currency movements than the other two), Ethereum, and Dogecoin.

Are animal spirits ahead?

On a day when there's relatively little in the way of token-specific catalysts, sometimes market sentiment tied to macro conditions easing is enough to provide a rising tide that lifts all boats. And given that crypto as an asset class is about as far out on the risk spectrum as most traditional investors are willing to go, today's outsize moves (which are greater than the moves seen in most indexes today) reflect this reality.

Aside from the impact on the U.S. dollar this CPI report is likely to have (which will benefit Bitcoin), all risk assets should benefit from longer-term yields heading lower. That's because the 10-year U.S. Treasury yield is most often viewed as the appropriate discount rate for equities and other risk assets. For crypto investors with a long-term investing time horizon, discounting future growth to the present requires some sort of interest rate, and this is the particular figure most investors are paying close attention to right now.

I think if macro conditions continue to soften, and investors believe that more accommodative monetary policy is on the horizon, it's possible animal spirits could roar back once again. Bitcoin, Ethereum, and Dogecoin are each widely considered to be quality digital assets by their associated communities. Perhaps today's CPI report is what they needed to hit the bid once again.

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 and Ethereum. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Cryptocurrencies

Bitcoin coin with a rising arrow.
Cryptocurrencies

Bitcoin price smashes new record highs as market value tops US$2.1 trillion

Bitcoin just soared to new all-time highs. But why?

Read more »

a businessman rips open his shirt superman style to reveal the bitcoin logo on a superhero style lycra suit under his clothes.
Cryptocurrencies

Bitcoin price reclaims US$100,000 after AMP reveals an investment

A rising Bitcoin price could validate AMP’s recent investment decision.

Read more »

person dancing in bitcoin spectacles wearing a gold outfit with hands up.
Cryptocurrencies

Why Bitcoin, Ethereum, and Dogecoin just popped again

Here's what gave investors confidence...

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Cryptocurrencies

Bitcoin price blasts past US$100,000 milestone before an unexpected move

Boom! The Bitcoin price just smashed through the US$100,000 mark.

Read more »

Young woman using computer laptop with hand on chin thinking about question, pensive expression.
Cryptocurrencies

Could this be the day the Bitcoin price cracks $100,000?

It's come awfully close at certain points during the past few weeks.

Read more »

ETF on white blocks with a rising arrow on top of coin piles.
ETFs

This ASX ETF is up 30% in a month. Too late to buy?

This ETF's gains have been nothing short of extraordinary.

Read more »

A man clenches his fists with glee having seen the share price go up on the computer screen in front of him.
Cryptocurrencies

Why did the Bitcoin price just rocket to another all-time high?

At new record highs, Bitcoin now has a market cap of almost US$1.8 trillion.

Read more »

Bitcoin coin with a rising arrow.
Cryptocurrencies

Why cryptocurrencies like Bitcoin and Ethereum are shooting for the moon today

Crypto investors just sent the Bitcoin price to new all-time highs. But why?

Read more »