Given their increasingly long-tail rally heading into the holiday season, cryptocurrencies probably didn't need another springboard bouncing them even higher. Yet on Tuesday, that's exactly what happened when the latest macroeconomic data hit the headlines.
In response, an impressive variety and number of coins and tokens leaped skyward in price. Cosmos Hub (ATOM +0.89%) was one of them, advancing by 19% in midafternoon trading. Joining the starry crypto was KuCoin (KCS +1.42%), which rose by roughly the same percentage; Aptos (APT +3.62%) with a 14% gain; and Fantom (FTM +0.19%) with a relatively light yet still solid boost of 7%.
Inflation melted a little more
The data that made crypto investors happy concerned that current global albatross, inflation. Early Tuesday, the government's Labor Department unveiled November figures for the U.S. Consumer Price Index (CPI), a closely tracked gauge of the costs of key goods (and therefore a yardstick for inflation). These data reveal that the CPI crept up by 3.1% year over year and 0.1% over the October level.
While this more or less met estimates from economists, it was seen by many as a sign that inflation continues to cool. After all, the October year-over-year increase was 3.2%. Although such a cooling doesn't mean inflation is fully tamed, it's a good sign that it continues to head in the right direction.
Inflation's trajectory matters to crypto investors for a number of reasons. Chiefly, if it's stagnant or falling, this -- theoretically, anyway -- reduces the Federal Reserve's eagerness to keep raising its key interest rates. In the best-case scenario, if inflation continues to fade, the Fed might even consider cutting said rates.
All things being equal, riskier investments like cryptos become more attractive as interest rates fall (since competing "safe" investments like bonds start to pay out less). Enough investors feel like we're heading into this scenario to drive up prices of the Cosmoses and KuCoins of this world.
CRYPTO: ATOM
Key Data Points
Buyer beware -- especially now
This is one of those environments that could easily turn nervy. These cryptos all have their merits and boast convincing use cases; however, even some of their dodgy brethren are enjoying leaps in price as the market continues to pile in. One big piece of negative economic news could potentially start bringing the house down. It's happened before.
So I'd say now is the time for the crypto-curious to be careful; it pays to be selective and invest in only the best and most high-potential currencies in this always-offbeat group of investments. Even at the best of times, they are volatile assets.
