Why Bitcoin, Ethereum, and Dogecoin Are Rising Today

What happened

Cryptocurrencies shook off mixed inflation data this morning and climbed after what has been a difficult last week for the industry on the regulatory front.

Since late yesterday afternoon, the price of the world’s largest cryptocurrency, Bitcoin (BTC 2.44%), was trading about 2.6% higher as of 11:25 a.m. ET. The price of the world’s second largest cryptocurrency, Ethereum (ETH 4.75%)traded 4.6% higher, while the meme token Dogecoin (DOGE 2.27%) was up 2.4 percent.

So what

All eyes were on the January reading of the Consumer Price Index (CPI) today, which tracks the prices of a market basket of consumer goods and services and is a way investors gauge inflation.

Image source: Getty Images.

The CPI rose 0.5% in January on a monthly basis, which is the largest monthly increase since October. The CPI was up 6.4% year-on-year, which is slightly down from December, but overall inflation data came in higher than economists had expected.

On the one hand, inflation is proving to be more stubborn and persistent than many expected, but I think investors were somewhat prepared for a tougher month after January’s red-hot jobs report that showed the US economy added more than half a million jobs.

Shelter costs accounted for roughly half of the increase in CPI in January, while energy costs rose 2% during the month and food prices rose 0.5%. Stripping out food and energy, core inflation rose 0.4% in the month and was up 5.6% year-on-year, slightly above analyst estimates. However, there were some positive price declines in the CPI, with used vehicle prices falling 1.9% and medical services falling 0.7% during January.

“Inflation is easing, but the path to lower inflation is unlikely to be smooth,” LPL FinancialAccording to Chief Economist Jeffrey Roach CNBC. “The Fed will not make decisions based on just one report, but it is clear that the risk is increasing that inflation will not cool quickly enough for the Fed’s liking.”

Cryptocurrencies were hammered in 2022 thanks to soaring interest rates meant to try to calm inflation, so until there is solid evidence that inflation is coming down, interest rates are likely to stay high. Higher prices make riskier assets like cryptocurrencies less attractive. But perhaps crypto investors had expected worse CPI data heading into today.

The crypto industry has recently been hit by restrictive regulatory moves in the past week. Specifically, the Securities and Exchange Commission (SEC) ordered the Kraken crypto exchange to end its staking-as-a-service program. So, the crypto firm Paxos was ordered by the SEC and New York state regulators to stop issuing the US dollar-backed stablecoin Binance USD.

Today, the Senate Banking Committee is holding a hearing on the recent crypto crash that will further discuss and perhaps provide insight into the direction of crypto regulation.

So what

Crypto seems to be rearing its head today due to the inflation data, although it may also take a breather from the selloff of the past few days as the inflation data was mixed and there still seems to be a regulatory overhang right now.

I still like Bitcoin and Ethereum and think the two most established cryptocurrencies are here to stay for a long time. I have no interest in the Dogecoin meme token, which I believe provides no real value.