Why Bitcoin, Ethereum and XRP are rising this morning

What happened

Several cryptocurrencies rose on Tuesday morning on buyers’ hopes that the Federal Reserve, which has raised interest rates aggressively this year, may ease back a bit from its hawkish monetary policy.

Starting at. 10 ET, the price of the world’s largest cryptocurrency by market capitalization, Bitcoin (BTC 3.72%)was up 4.8% in the previous 24 hours, hovering around $20,000. The world’s second largest cryptocurrency, Ethereum (ETH 2.41%)was 4.2% higher, and the price of XRP (XRP 5.90%) was up 6.8 percent.

So what

Investors have the Reserve Bank of Australia to thank for sending stocks and cryptos higher on Tuesday morning after it raised its benchmark interest rate by 25 basis points (0.25 percentage point) when most experts had expected a 50 basis point increase. Philip Lowe, governor of the Reserve Bank of Australia, attributed the smaller move to the fact that policymakers have already raised interest rates “significantly in a short period of time.”

Image source: Getty Images.

Furthermore, Lowe and his colleagues are beginning to worry about the economic outlook and how these rate hikes will affect consumers once their full effect is realized.

“One source of uncertainty is the outlook for the global economy, which has deteriorated recently. Another is how household spending in Australia responds to the tighter economic conditions,” Lowe said in a statement. “Higher inflation and higher interest rates are putting pressure on household budgets, with the full effects of higher interest rates yet to be felt in mortgage payments.”

Rapidly rising interest rates have been a massive headwind for crypto and most other risky assets, leading to huge falls in their valuations. The US Dollar Index, which tracks the US dollar against other currencies, has also fallen in recent days. That’s another positive for crypto because Bitcoin tends to have an inverse relationship with the dollar.

Despite the news from Australia, the Federal Reserve is still expected to implement two more major interest rate hikes before the end of the year, although it is possible that the plan will change as new inflation data comes in.

In other news, XRP, the cryptocurrency developed by the founders of Ripple Labs, continues to make money in what appears to be a favorable outcome in a nearly two-year legal battle that may soon come to a conclusion.

The Securities and Exchange Commission (SEC) sued Ripple Labs in 2020 for not registering XRP as a security when it raised money in 2013, and for not providing enough transparency to investors. But it seems the SEC is starting to back off. Last month, both Ripple and the SEC filed applications asking the US District Court for the Southern District of New York to grant summary judgment in the case.

Recently, Judge Analisa Torres ruled that the SEC must release documents from a former director, who may have previously written in a speech that he does not believe Ethereum is a security – evidence that Ripple believes is crucial to the case.

Furthermore, SEC Chairman Gary Gensler said at a recent conference that he believes Bitcoin and Ethereum should be regulated by the Commodities Futures Trading Commission, which crypto advocates prefer to be regulated by the SEC.

What now

While I’m not convinced that the Reserve Bank of Australia’s smaller-than-expected rate hike means the US central bank will ease up on the war on inflation, I hope we’ll see a more positive inflation report on October 13, which might help the narrative.

Still, I’ve been impressed by Bitcoin’s ability to hang around the $20,000 level, and I think ultimately Bitcoin and Ethereum will prove to be good long-term buys. I also think XRP is on the way to victory in its nearly two-year legal battle, which bodes well for that token.