Why Bitcoin, Coinbase and Riot platforms are moving higher today

What happened

The price of several cryptocurrencies and crypto-related stocks rose today for no apparent reason, but as investors braced for new economic data and the start of earnings season later this week.

Since late yesterday afternoon, the price of the world’s largest cryptocurrency, Bitcoin (BTC 2.89%)traded 3.8% higher as of 3:37 PM ET today.

Meanwhile, shares of the major crypto exchange Coinbase Global (COIN 7.63%) traded 5.5% higher during regular trading hours, while shares of the Bitcoin miner Riot Platforms (RIOT 15.50%) traded almost 15% higher.

So what

Because the markets were closed on Friday, the market did not get to react to the jobs report from March until today. The U.S. economy added 236,000 jobs in March, representing a decline in hiring and in line with estimates. However, unemployment fell to 3.5% as labor force participation increased.

Image source: Getty Images.

Still, it’s a healthy month of hiring, and after the report, traders increased their bets that the Federal Reserve would raise interest rates at its May meeting. Rising interest rates crushed Bitcoin in 2022.

In another report out today from the Federal Reserve Bank of New York, consumers said it became more difficult to access credit in March and is the toughest it has been since 2014. Since the banking crisis began, banks have been expected to tighten into credit, which could cool the economy and potentially even trigger a recession. This could entice the Fed to cut interest rates, which has historically been good for riskier assets like Bitcoin.

In addition, Bernstein analysts said in a research note today that investors’ growing interest in gold should also lead to an increase in interest in Bitcoin. The analysts said they see more investors expecting a hard landing for the economy, which would trigger interest rate cuts and a weakening dollar, which has led them to favor gold as a hedge.

“When there is a massive currency depreciation event, while both Bitcoin and Gold rally, Bitcoin outperforms Gold,” the analysts wrote. “For example, post-Covid monetary printing, Bitcoin outperformed gold (2.9x over ~3.5 years). In fact, even this year, as fears of the banking crisis have escalated, Bitcoin is up ~71% YTD vs. Gold -rally ~10% YTD.”

When Bitcoin trades up, other crypto stocks tend to follow suit. Coinbase benefits when there is increased trading activity in cryptocurrencies, while Riot benefits when the asset that the company mines, Bitcoin, increases in value.

What now

I think the economic data has been somewhat contradictory lately. Traders have been pushing interest rate cuts this year, which is likely to favor Bitcoin and crypto, but Friday’s jobs report also suggests that inflation hasn’t been tamed yet. The Fed is now expected to make another quarter-point increase at the meeting in May.

Nevertheless, there will be new important inflation data on Wednesday, and bank earnings start on Friday. Both of these events could still change the Fed’s path, so you’ll want to keep an eye on them.

While I expect volatility, I think Bitcoin is a cryptocurrency worth having at least a small exposure to, and I expect Bitcoin to benefit from a weakening dollar or a rate cut. Currently, I am not interested in Coinbase or Riot due to the improved regulatory environment around crypto companies, although both will likely benefit if Bitcoin rises. I just prefer Bitcoin.