What happened
Shares of several of the most prominent and widely known cryptocurrencies rose this morning for no obvious reason as the industry continues to deal with fallout from the FTX scandal. Federal Reserve chairman Jerome Powell is also slated to deliver a press conference at 1:30 p.m. ET today.
The price of the world's largest cryptocurrency, Bitcoin (BTC +0.46%), is trading about 2.5% higher than yesterday's closing price as of 10:16 a.m. ET today.
Meanwhile, the price of the world's second-largest cryptocurrency, Ethereum (ETH 0.11%), is trading about 4% higher, and the price of the meme token Dogecoin (DOGE +1.25%) is up about 2%.
So what
The crypto industry has been like the wild West since FTX, one of the world's largest crypto exchanges, filed for bankruptcy and it came to light that former FTX CEO Sam Bankman-Fried very likely committed highly fraudulent behavior.
Image source: Getty Images.
Other major crypto firms such as BlockFi recently filed for bankruptcy as well. The price of Bitcoin has not been unaffected by FTX's collapse either, its price having fallen from more than $21,000 in early November when the FTX debacle started to below $16,000 at one point recently.
But in recent days, Bitcoin has rebounded, surpassing $17,000 and trading at $16,820 as of this writing. While the FTX situation has led to contagion and shaken the faith of many investors in the space, there hasn't been any big, earth-shattering news about Bitcoin specifically. Still, many analysts don't think the price of Bitcoin will be able to hold up at this level.
The crypto asset trading firm QCP Capital recently said in its newsletter that "while more one-off shocks might not be so forthcoming in a market filled with fear, a continued deflation of the crypto market will continue well into next year as many are forced to continually sell assets to raise liquidity."
Ulrich Bindseil and Jürgen Schaaf, both of whom work at the European Central Bank, also said in a blog post this morning that "the seeming stabilization [of Bitcoin] signals a breather on the way to new heights. More likely, however, it is an artificially induced last gasp before the road to irrelevance -- and this was already foreseeable before FTX went bust and sent the [Bitcoin] price to well below USD16,000."
CRYPTO: BTC
Key Data Points
In other news, Powell will address the media this afternoon. Investors will be looking for clues about how the Fed views inflation and interest rate hikes. Crypto has struggled this year due to the Fed's hawkish monetary policy.
This morning, the payroll processing firm ADP reported that private companies added only 127,000 jobs in November, way below estimates and perhaps proof that the labor market is starting to deteriorate. But investors also seemed concerned about other data this morning showing that U.S. gross domestic product in the third quarter of the year grew 2.9% on a seasonally adjusted annual basis, more than initially reported.
Now what
I definitely think the crypto space could continue to be choppy in the near term until investors feel that much of the contagion from FTX has played out. But I do expect Bitcoin and Ethereum to survive and be here over the long term.
It will be interesting to hear Powell's comments later. The Fed has been saying it needs to see some deterioration in the labor market, but the better-than-expected GDP data might have some worried about persistent inflation.
