Cryptocurrencies had a great weekend and are off on the right foot on Monday as well. Economic news last week gave investors reason to move further out on the risk curve, and that meant in part bidding up the value of cryptocurrencies.
Three of the biggest movers were Ethereum (ETH -0.96%), Dogecoin (DOGE -4.02%), and Shiba Inu (SHIB -5.22%). Ethereum rose as much as 5.4% between Friday's close and noon ET on Monday and is now up 4.8% over that time. Dogecoin had a more pronounced move, climbing 10.2% and currently trading 9.1% higher. Shiba Inu is at its high point, up 7.1%.
Economic data driving markets
The economic news last week helped push markets, including cryptocurrencies, higher to end the week. Investors saw the Federal Reserve's decision to pause rate hikes as a positive and there was a lot of speculation that rates would be kept flat through the end of the year.
On top of that, a weaker-than-expected jobs report was seen as a positive for markets. As the thinking goes, if job growth is slowing, the economy may not be overheating -- which means the Federal Reserve will stop raising rates to slow the economy.
It may seem counterintuitive, but lower interest rates are currently seen as very bullish for riskier assets like stocks and cryptocurrencies. And short term, that's driving values higher.
ETF speculation continues
Trading momentum continues to be strong on speculation that more crypto ETFs will be approved. We know the SEC is considering multiple Bitcoin ETFs, and that could pave the way for both more crypto ETFs and more funds flowing into the industry more broadly.
BlackRock is one of the leading institutions applying for a spot ETF. The company controls $9 trillion in assets under management, so it could lead to a big inflow of funds to the crypto industry. That's the speculation.
Many institutions have shied away from crypto because of the legal grey area it operates in, especially in the U.S. So, approval by the SEC would be generally bullish for crypto broadly at a time when many countries are writing specific rules on how cryptocurrencies can be traded and how blockchain companies can operate.
While the market is speculating that a Bitcoin ETF would eventually be bullish for tokens like Ethereum, Dogecoin, and Shiba Inu, it's not clear if they would eventually get spot ETFs as well.
Speculation rules the day
The reality is that everything I discussed above is speculation about the value of cryptocurrencies. There's no increased utility or ability to pay for goods using the blockchain. Investors are simply bidding up digital assets because of what the Federal Reserve did and what they think the SEC might do.
If any of this speculation ends up being false, it's possible that crypto values could crash again. I would like to see more real world utility being built into the blockchain and tokens like Dogecoin and Shiba Inu find real use cases. Until they do, this is just a speculative asset.
Ethereum still has the potential to be a valuable blockchain, but it also struggles with high costs and slow transactions. Upgrades could change that, but that will take time. Investors seem to be glossing over that utility need today.
