Why Bitcoin, Ethereum, Cardano, and Coinbase Are Resurging

What happened

The crypto market has a great day on Tuesday. Just after 2pm ET, many leading tokens had big 24-hour gains. Here is a selection of a few leading names, but dozens of altcoins posted similar price increases.

Data from Coingecko.com, reflecting 24-hour price changes at 2:00 PM ET, March 14, 2023.

The surging crypto market also lifted many stocks with close ties to the sector. For example, shares of leading crypto trading exchanges Coin base (COIN 5.88%) rose as much as 11.9% on Tuesday before settling back to a 5.9% gain by the end of the trading session.

So what

There are a lot of crypto-related balls in the air right now. Future historians will probably write books about this week in blockchain history. At the very least, you’ll see chapters about it in primers in the early days of crypto investing. This brief news summary does not aim for that kind of scope. Instead, here are some of Tuesday’s most game-changing highlights — in no particular order:

• The rash of bank runs and bank collapses hit the crypto sector hard last week because many crypto exchanges and stablecoins had active business relationships with the failed banks. This week, investors’ fears largely subsided after regulators promised to safeguard the account balances of the failing banks’ customers.
• The banking crisis may inspire the Federal Reserve to switch gears in its inflation-fighting efforts. In light of the banking sector’s struggles amid rising benchmark interest rates, the agency may accept higher inflation in exchange for a lower risk of further financial institution meltdowns. The Federal Open Market Committee’s next rate-setting meeting is scheduled for March 22. The recent bullish crypto action suggests that many traders now expect a smaller rate hike than before, or perhaps even no rate hike at all this time around. Lower interest rates will be good news for crypto market supporters, and also for the digital currencies themselves.
• Tuesday morning’s consumer price index report was in line with expectations, showing that inflation cooled slightly in February. It is yet another data point that could lead to lower inflation-busting interest rate increases next week and beyond.

What now

Tuesday’s jump added to the momentum these cryptocurrencies built over the weekend. Cardano has gained 17% in two days, Ethereum is up 18% in the same period, and Bitcoin is up 23%.

This is not a full recovery from the pain of 2022. Ethereum is trading at prices last seen last August, and Bitcoin’s bounce has brought it back to levels it previously crashed in June. Coinbase and Cardano, on the other hand, have only returned to last week’s price levels.

All these tokens have a long way to go before they can set new records again. The Fed could add fuel to those fires next week, sending crypto prices skyward by delivering a small rate hike or by forgoing one, but it will likely take a lot more to drive that kind of response. I’m talking about progress towards a firmer regulatory framework for the trading and ownership of cryptocurrencies, along with a range of consumer-ready apps and services in the crypto-based financial sector.

These events are unlikely to be the spark that ignites the crypto market’s moon-bound rockets again. Call it a dress rehearsal for the real wave, or maybe even a head-fake ahead of your next dip. Always moving is the crypto future. Stay tuned for further drama, and feel free to make some modest investments in this volatile sector. Just be prepared for a lot of speed bumps and potholes on the road ahead.