What happened
Cryptocurrency values have spiked in early trading on Monday as investors pour into higher-risk assets. Ironically, this follows a crash in weekend trading that left the industry near the lowest level in a year on Sunday. But the bounce started in evening trading, and now values are up big on Monday morning.
In the past 24 hours, as of 10:45 a.m. ET, Chainlink (LINK -4.69%) is up 7.7%, The Sandbox (SAND -5.70%) is up 7.1%, and Polkadot (DOT -4.96%) is up 5.2%.
Image source: Getty Images.
So what
Some of the jump is the anticipation of new legislation being proposed by U.S. Sens. Cynthia Lummis and Kirsten Gillibrand on Tuesday. The two have been working together for months on a bill that would regulate digital currencies. Lummis has made appearances at Bitcoin conferences and podcasts ahead of the release, indicating that legislation could be fairly friendly to digital assets.
The stock market overall is up in advance of more economic news this week. We will get another reading on inflation in the U.S. and China, which will be an indicator for both economic growth and the Federal Reserve's response. Interest rate changes in Europe are also expected.
As I'm writing, the S&P 500 and Nasdaq Composite are up almost 1% while oil is trading down about 1%, indicating that traders are bullish on the economy for today. That said, we've see that the mood can change in just a few hours based on crypto trading.
Now what
As positive as today's move is, the trend is still down for cryptocurrencies right now. In the past month, Chainlink is down 26.8%, The Sandbox fell 35.1%, and Polkadot is off 32.2%. A bounce of a day or two may mask the move, but values are definitely trending lower.
I think we're in for a much longer shakeout in the industry as investors and developers decide what projects will be the winners long term. I am focused on the highest-quality projects with a large number of developers building on the platform, which means Polkadot is the only one in this group that I would be interested in today.
Long term, the promise for cryptocurrencies is building digital utility and being far more than just a trading asset. That's going to take time to play out, and we could be in for months or even years of low cryptocurrency values as a result. But long term, the industry is positioned to be extremely disruptive, and that's why I'm still buying cryptocurrencies that have the potential to be the blockchains of the future.
