Why Bitcoin, Ethereum, and Dogecoin Are Rising Today

What happened

Shares in several of the most prominent and well-known cryptocurrencies rose this morning for no apparent reason as the industry continues to deal with the fallout from the FTX scandal. Federal Reserve Chairman Jerome Powell is also scheduled to hold a press conference at 1:30 PM ET today.

The price of the world’s largest cryptocurrency, Bitcoin (BTC 2.84%)traded approximately 2.5% higher than yesterday’s closing price at 10:16 a.m. ET today.

Meanwhile, the price of the world’s second largest cryptocurrency, Ethereum (ETH 4.79%)is trading about 4% higher, and the price of the meme token Dogecoin (DOGE 2.48%) is up about 2%.

So what

The crypto industry has been like the wild west since FTX, one of the world’s largest crypto exchanges, filed for bankruptcy and it emerged that former FTX CEO Sam Bankman-Fried was very likely to have engaged in highly fraudulent behavior.

Image source: Getty Images.

Other major crypto firms such as BlockFi have also recently filed for bankruptcy. The price of Bitcoin has also not been unaffected by FTX’s collapse, falling from more than $21,000 in early November when the FTX debacle began to below $16,000 at one point recently.

But in recent days, Bitcoin has rebounded, surpassing $17,000 and trading at $16,820 at the time of writing. While the FTX situation has caused contagion and shaken the faith of many investors in the space, there hasn’t been any big, worldwide news about Bitcoin specifically. Nevertheless, many analysts do not believe that the price of Bitcoin will be able to stay at this level.

Crypto asset trading firm QCP Capital recently said in its newsletter that “while more one-off shocks may not be imminent in a market filled with fear, continued deflation of the crypto market will continue well into next year as many are forced to continuously sell assets to raise liquidity.”

Ulrich Bindseil and Jürgen Schaaf, who both work at the European Central Bank, also said in a blog post this morning that “the apparent stabilization [of Bitcoin] signaling a pause on the way to new heights. More likely, however, it is an artificially induced last gasp before the road to irrelevance – and this was already predictable before FTX broke and sent [Bitcoin] priced at well under USD16,000.”

In other news, Powell will address the media this afternoon. Investors will be looking for clues about how the Fed views inflation and rate hikes. Crypto has struggled this year due to the Fed’s hawkish monetary policy.

This morning, payroll processing firm ADP reported that private companies added just 127,000 jobs in November, well below estimates and perhaps evidence that the labor market is beginning to deteriorate. But investors also seemed concerned about other data this morning showing that US gross domestic product in the third quarter of the year grew 2.9% on a seasonally adjusted annual basis, more than first reported.

What now

I definitely think the crypto space could continue to be choppy in the short term until investors feel that much of the contagion from FTX has played out. But I expect Bitcoin and Ethereum to survive and be here for the long term.

It will be interesting to hear Powell’s comments later. The Fed has said it needs to see some deterioration in the labor market, but the better-than-expected GDP data may have some concerns about persistent inflation.