The crypto industry is once again moving higher, and three of the biggest cryptocurrencies are leading the way. As of 2 p.m. ET Friday, Bitcoin (BTC +0.49%) was up by 3% from where it traded when the stock market closed Thursday, Ethereum (ETH +1.05%) was up 4%, and Dogecoin (DOGE +1.98%) was up 5.3%.
Cryptocurrencies have been volatile over the past year, but have been charging higher since mid-October.
CRYPTO: BTC
Key Data Points
Behind the rise in cryptocurrencies
The biggest news out relating to crypto Friday is that BlackRock (BLK +0.00%) is pursuing an Ethereum exchange-traded fund (ETF), just as it has been trying to get permission to launch a Bitcoin ETF. There are already ways for investors to buy crypto on traditional exchanges, but they're not as efficient as ETFs, which is why BlackRock and others are trying to get ETFs approved.
In theory, more options for investing in crypto will lead to more money pouring into tokens, which will drive prices higher. That's why traders are getting out in front of any ETF approvals, and they could bid values higher.
Right now, the barrier preventing such ETFs from reaching the market is the Securities and Exchange Commission (SEC), which has neither approved crypto ETFs nor laid out rules around cryptocurrencies in general. That has left the industry in limbo, and Congress has yet to agree on a regulatory framework for crypto either. Based on BlackRock's involvement, many investors speculate that ETFs could be the one way to make crypto more mainstream as the SEC and Congress wait to act.
The interesting thing is, it's not just Bitcoin and Ethereum that are moving higher on the speculation about Bitcoin and Ethereum ETFs -- all of the major cryptocurrencies are moving higher as investors expect there will eventually be a flood of crypto ETF products.
CRYPTO: ETH
Key Data Points
Growth on the blockchain
Despite the drop in crypto prices over the last couple of years, the industry continues to develop, and businesses and developers are creating more meaningful projects on blockchains. Visa is testing using blockchains to complete payments, and so are Shopify and MercadoLibre. There are dozens, if not hundreds, of other projects underway at companies around the world.
This is the kind of activity that's going to drive value to cryptocurrencies and the blockchain, but investors are currently just speculating about possible future value creation. I tend to think there will be value, but the moves recently aren't necessarily indicative of long-term value.
What I would watch for is where developers are building on the blockchain. It's not Bitcoin or Dogecoin that are getting activity -- it's blockchains like Ethereum and Solana that are built for utility and more activity that will ultimately benefit.
I would also expect to see the jump in value subside even if ETFs are approved, based on the "buy the rumor, sell the news" pattern. That's why I'm not jumping in on the crypto bounce right now. But I will hold on for the ride as this industry matures.
