What happened
Most cryptocurrencies inched higher today along with the broader stock market, which has opened high today. The Dow Jones Industrial Average was up close to 200 points, as of this writing, and the Nasdaq Composite traded roughly 1.6% higher.
Over the last 24 hours, the price of the world's largest cryptocurrency, Bitcoin (BTC -0.36%), had climbed 2.6% as of 10:17 a.m. ET today. The price of the second-largest cryptocurrency, Ethereum (ETH -0.31%), traded 5.6% higher and the price of meme token Dogecoin (DOGE -1.74%) traded 2.4% higher.
So what
House Speaker Nancy Pelosi recently traveled to Taiwan, which marked the highest-ranking U.S. official to visit the territory in 25 years. China didn't like the visit, which seemed to concern investors over the last two days and led to back-to-back down days for the market. Now that Pelosi has left Taiwan, the market seems to be taking a breather.
Image source: Getty Images.
Additionally, members of the Federal Reserve seem to be growing more confident that they will be able to bring down some of the highest levels of inflation seen in 40 years without triggering a deep recession.
St. Louis Federal Reserve President James Bullard told CNBC this morning that he doesn't view the U.S. economy to be in a recession, despite two straight quarters of negative gross domestic product growth (GDP) to start the year. He further said he believes that ongoing interest rate hikes can bring down inflation and achieve a soft landing for the economy. The sentiment appears to be resonating.
If the market really starts to believe that inflation has peaked and could in fact reverse course, that would be very beneficial for cryptocurrencies because it would likely slow rate hikes. Rising interest rates make safer assets such as U.S. Treasury bills yield more, which makes riskier assets like cryptocurrencies less appealing.
Interestingly, cryptocurrencies are trading higher today, despite rising bond yields today, but cryptocurrencies have shown this year that they can move just like stocks, so the move today is likely being more influenced by broader market sentiment.
Now what
Bitcoin and Ethereum have enjoyed a superb month. Right now there is still uncertainty regarding where the economy is ultimately headed and if the Fed can truly engineer a soft landing. If new data starts to show bad indicators, then these two cryptocurrencies could fall further.
But after a rough year, I still like Bitcoin and Ethereum at these levels over the long term. There is growing adoption for both. Bitcoin is the pioneer of blockchain technology and Ethereum has all sorts of real-world potential in terms of how its smart-contract technology can be used.
I would avoid Dogecoin, given that it really doesn't bring anything unique to the table from a real-world use case or technical perspective.
