It's been a great week for the crypto industry and it seems like every major stock and token is up double digits. There's positive news from exchange-traded fund (ETF) inflows and Bitcoin (BTC -1.89%) reaching new all-time highs, but it's really sentiment and speculation that's driving the market. Crypto has long been correlated with high-growth stocks and the last few weeks have been great for that segment of the market.
According to data provided by S&P Global Market Intelligence, Coinbase Global (COIN 5.68%) jumped as much as 23.6% this week, Cardano (ADA -2.61%) was up 17.6%, and Solana (SOL -4.95%) popped as much as 35.3%. At 12:30 p.m. ET on Friday, values were up 22.9%, 15.5%, and 29.3% for the week.
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The rising tide in crypto
The amount of money flowing into the crypto industry has been astounding as ETFs have made crypto more accessible. On Wednesday alone, $673 million of net inflows hit the Bitcoin ETFs, which is one of the biggest reasons Bitcoin is up sharply.
Coinbase is a direct beneficiary of these inflows because it's the custodian for most of the ETFs on the market today. And it has a prime brokerage relationship with a lot of big banks, so the institutional interest is important.
There was also a bit of a glitch in the Coinbase app this week, which had some users seeing a zero balance. CEO Brian Armstrong said part of the problem was a more than 10x surge in traffic to the site, which shows just how much the interest in crypto has jumped this week.
Utility goes front and center
Solana and Cardano are known more as utility tokens compared to Bitcoin's store-of-value thesis. And they're popping this week as investors look for not only follow-on trades but also tokens that have utility of upside.
Both blockchains are designed to handle well over 1,000 transactions per second and for real use cases like financial transactions or digital asset ownership, this will be a real advantage over rivals like Bitcoin and Ethereum.
Investors are also looking for what token may be the next to get a boost from ETFs being approved and as two of the biggest market caps in the market, Solana and Cardano would be natural fits.
Crypto momentum is back again
The crypto market hasn't been driven by anything more than momentum lately and that hit a fever pitch this week. Bitcoin hitting all-time highs was welcome news and there's hope that more regulatory clarity in the U.S. will drive more trading.
It's worth pointing out that the optimism in crypto may not last. Inflation has remained persistently higher, retailers are showing signs of consumers pulling back, and housing continues to get more expensive.
These were the factors that led to the stock market and crypto dropping in 2022. Eventually, the optimism will go too far and investors need to be prepared for what to do and how the companies, or tokens, they own are going to react. Volatility feels great on the way up, but the way down can be painful.
