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Bitcoin, Ethereum and Dogecoin post a massive rally on Friday
After a week of downward trend, Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH) e Dogemoneta (CRYPTO: DOGE) entered trading Friday morning.
As of 3 PM ET, Bitcoin was up 4.1% from yesterday’s stock market close, Ethereum was up 2.6%, and Dogecoin was up 5.6%. And they all acted based on the same information.
Unemployment data and cryptocurrencies
Cryptocurrency values have increased as the US Department of Labor released April 2024 jobs data. The US created 175,000 jobs last month and the unemployment rate increased slightly to 3.9%.
Economists had expected 235,000 new jobs and an unemployment rate of 3.8%.
There may be revisions to the initial data, but the market will often react solely to the main report. And that’s exactly what happened with the cryptocurrency market reacting just seconds after the report was released.
Does Unemployment Really Impact Cryptocurrencies?
The question really is what this news has to do with cryptocurrencies. Many market participants believe that a worsening economy means the Federal Reserve will lower rates more quickly. Current expectations are for a rate cut in September, but there may be no rate cuts this year if inflation remains high.
It is a balance to keep rates higher if the economy weakens because lower rates can be a catalyst for greater economic activity.
I also wonder whether or not rates have a significant impact on cryptocurrencies. Outside of further speculation, in most cases lower rates have no fundamental impact on the cryptocurrency market.
Higher rates are bad for the crypto meme
While Bitcoin has solidified its position as a form of digital gold and Ethereum is commonly known as a more useful blockchain with many scaling solutions, Dogecoin could be the hardest hit if rates stay where they are and the economy worsens.
Dogecoin is a meme coin with no real utility, and that meme position will be difficult to maintain if people have fewer funds to spend on speculative assets. I think this explains the reaction today.
This is part of the normal volatility of the cryptocurrency market, but it also highlights that, ultimately, the meme that began in 2020 may not hold much water.
Be careful in cryptocurrencies today
The cryptocurrency market has been in crisis in 2024, despite higher interest rates and signs that the economy is weakening. And there has also been tailwinds from the approval of Bitcoin Exchange Traded Funds (ETFs) in the United States
But some of the market tailwinds may fade, which will not be good for long-term valuations unless there is a significant increase in the utility of cryptocurrencies. Bitcoin is getting more expensive after the latest halving and Ethereum hasn’t proven to be very cheap either.
The story continues
Dogecoin has very little utility and has focused on its meme status, which can come and go.
I think a day like today is the right time to take some chips off the table in the cryptocurrency sector, as the market signals that there are weaker fundamentals for the economy going forward. Like it or not, the economy and the Fed are still the main drivers of cryptocurrencies in the long term.
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Travis Hoium has positions in Ethereum. The Motley Fool has positions and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
Bitcoin, Ethereum and Dogecoin post a massive rally on Friday was originally published by The Motley Fool