What happened

Today's price action in risk assets has taken many top cryptocurrencies on an impressive ride. Top tokens Bitcoin (BTC 1.13%), Ethereum (ETH 1.11%), and Dogecoin (DOGE -0.07%) have been among the leading gainers in the crypto sector, posting gains of 4.6%, 8.3%, and 6.1%, respectively, over the past 24 hours as of 1:30 p.m. ET on Thursday. 

These moves, along with the impressive upward momentum in other higher-risk asset classes, is a direct result of yesterday's rather dovish 25-basis-point hike in interest rates by the Federal Reserve. While still a rate hike, the pace of monetary policy tightening has slowed, with Fed chairman Jerome Powell hinting at an eventual pause after a "couple more" rate hikes. 

Powell highlighted some encouraging signs that inflation has started to come down. Accordingly, given the invariably long lags that impacts policy making, the actions taken by the Fed to calm inflation last year appear to be working.

For higher-risk assets such as Bitcoin, Ethereum, and Dogecoin, this sort of macroeconomic situation is a positive, and investors are piling in today.

So what

The Fed's decisions have had extremely negative effects for a wide range of assets in 2022. Whether they are unprofitable tech companies, meme stocks, cryptocurrencies, or other assets more sensitive to interest rates, aggressive-growth investors have been hit hard.

That's because as money becomes more expensive, speculative capital tends to rotate into more-defensive areas of the market, since the minimum rate of return for investors increases and valuations begin to matter.

However, if easy-money policies are on the horizon (or investors are speculating that they are), then a self-fulfilling momentum rally could be in the cards.

That's what investors seem to be betting on today, with refreshed hopes for a pause-and-pivot scenario sending these tokens much higher this afternoon.

Now what

The hangover crypto investors felt in 2022 after the incredible party of 2021 appears to have dissipated. Now, the question is whether the Federal Reserve's punch bowl (accommodative monetary policy) will return. Today's incredibly bullish risk-on sentiment in the market appears to suggest that plenty of investors believe this will be the case.

Bitcoin, Ethereum, and Dogecoin are distinct assets, with completely different blockchain technologies, consensus mechanisms, and reasons for existing. But right now, macroeconomic catalysts are steering the ship when it comes to returns for these individual tokens.