what happened
Prices of several cryptocurrencies and crypto-related stocks rose today for no apparent reason, but as investors braced for new economic data and earnings season to begin later this week.
The price of the world’s largest cryptocurrency since yesterday afternoon Bitcoin (BTC 2.81%)Traded 3.8% higher as of 3:37 pm ET today.
Meanwhile, shares are major crypto exchanges Coinbase Global (Coins 7.63%) During normal trading hours, shares of the bitcoin miner traded 5.5% higher Riot Platform (Rioting 15.50%) About 15% traded higher.
so what
Because markets were closed on Friday, the market could not react to the March jobs report until today. The U.S. economy added 236,000 jobs in March, representing a slowdown in hiring and in line with estimates. However, the unemployment rate fell to 3.5% as the labor force participation rate increased.
Image source: Getty Images.
Still, it was a healthy month of hiring, and traders increased their bets following reports that the Federal Reserve will raise interest rates at its May meeting. Rising interest rates crush Bitcoin in 2022.
Yet in another report released today from the Federal Reserve Bank of New York, consumers said accessing credit became more difficult in March and was the most difficult since 2014. Since the beginning of the banking crisis, banks are expected to tighten credit, which can cool the economy and potentially even trigger a recession. This could tempt the Fed to cut interest rates, which is historically good for riskier assets like Bitcoin.
Additionally, Bernstein analysts said in a research note today that growing investor interest in gold will lead to increased interest in Bitcoin. Analysts say they expect more investors to expect a hard landing for the economy, which will lower rates and weaken the dollar, which has started to favor gold as their hedge.
“When a massive financial meltdown occurs, when both bitcoin and gold rally, bitcoin outperforms gold,” the analysts wrote. “For example, post-Covid financial printing, Bitcoin has outperformed gold (~2.9x over 3.5 years). In fact, even this year, as fears of a banking crisis have risen, Bitcoin has rallied ~71% YTD vs. gold ~10% YTD.”
When Bitcoin trades other crypto stocks tend to follow suit. Coinbase benefits when trading activity in cryptocurrencies increases, while Riot benefits as the company’s Bitcoin mining assets increase in value.
what now
I think the economic data has been a bit conflicting recently. Traders have cut rates this year, which is likely to support bitcoin and crypto, but Friday’s jobs report also indicated that inflation is still out of control. The Fed is now expected to hike another quarter point at its May meeting.
Still, there will be new core inflation data on Wednesday, and then bank earnings on Friday. These two events could still change the Fed’s course, so you’ll want to keep an eye on them.
While I expect volatility, I think Bitcoin is a cryptocurrency worth having at least some exposure to, and I would expect Bitcoin to benefit from a weakening dollar or rate cuts. Currently, I am not interested in Coinbase or Riot due to the improved regulatory environment around crypto companies, although both will likely benefit if Bitcoin goes up. I just love bitcoin.
Bram Berkowitz has a position on Bitcoin. The Motley Fool holds and recommends positions in Bitcoin and Coinbase Global. Motley Fool has a revealing policy.