Why Bitcoin, Dogecoin, and XRP Are Rising Today
What happened
The price of several cryptocurrencies rose today after the Federal Reserve ended its March meeting yesterday, as well as due to some token-specific news.
Since late yesterday afternoon, the price of the world’s largest cryptocurrency, Bitcoin (BTC -0.60%), traded about 4.8% higher as of 12:02 PM ET today, with Bitcoin above $28,700. Meanwhile, the price of XRP (XRP 1.72%) traded about 7.2% higher, and the meme token Dogecoin (DOGE 0.92%) was up close to 8%.
So what
The Fed ended its meeting yesterday with a quarter-point rate hike, bringing the Fed’s benchmark overnight rate, the federal funds rate, to within a range of 4.75% and 5%. The Fed also appeared to be taking a more dovish tone, indicating that the rate hike campaign may end soon.
Image source: Getty Images.
Bitcoin and the rest of the crypto market have been battered since the Fed began raising interest rates to combat some of the highest levels of inflation seen in around four decades. Rising interest rates have made short-term US Treasury bills attractive to invest in, as well as riskier assets like Bitcoin much less favorable.
While the Fed had been much more hawkish earlier this month, the recent banking crisis, which resulted in the collapse of several banks, has tempered its tone. The main reason for this change is that banks are likely to tighten credit in the coming months as they further monitor liquidity and also prepare for credit normalization in their existing loan portfolios. Fed Chairman Jerome Powell said during his press conference yesterday that this could have a cooling effect on the economy, making some of the Fed’s work for it.
Dogecoin appears to be benefiting from a tweet from Twitter CEO Elon Musk, who responded to another tweet from a user about visiting the US and seeing SpaceX’s upcoming Starship launch. “Okay, but it will cost 3 Doge,” Musk replied.
That seemed to inspire some faith that Musk will eventually incorporate crypto payments into Twitter, including Dogecoin. Given Musk’s influence over the Dogecoin community, it’s not surprising to see investors get excited about a Musk tweet.
XRP appears to be benefiting from the belief that a court decision is coming soon in a closely watched lawsuit between Ripple, the company that created XRP, and the Securities and Exchange Commission (SEC). The SEC sued Ripple, claiming it sold unregistered securities when it issued $1.3 billion in XRP cryptocurrency years ago. Many believe Ripple will win the case, setting a precedent that will make it more difficult for the SEC to classify many cryptocurrencies as securities, which has been a long-standing debate between the crypto community and the SEC.
What now
I think the move among cryptocurrencies is largely due to the belief that the Fed will soon swing and that interest rates will not rise to 6%, which seemed like a possibility before the banking crisis. Cryptocurrencies, which were started in response to the Great Recession and greater distrust of the mainstream financial system, also tend to rise when traditional banks or currencies like the US dollar struggle.
I think Bitcoin is going to be here for the long term and will be a good long term buy. I think XRP and its network have some interesting opportunities and could benefit from winning the SEC case. That said, I have no interest in Dogecoin because I don’t think the cryptocurrency or the blockchain network offers anything particularly unique.
