Altcoins
Why Altcoins Like Cardano and Shiba Inu Skyrocketed This Week
Sometimes, it seems like the cryptocurrency market is basically a pack of wolves or a school of fish, a collection of individuals moving in concert, in reaction to an event. This week was one of those times, with positive macroeconomic developments encouraging the crowd to move higher. Two dozen altcoins posted double-digit gains during the week. Investors didn’t seem to discriminate based on coin type or function.
As a result, cryptocurrencies are as diverse as meme money. Shiba Inu Dog (CRYPTO: SHIB) and smart contract platform Cardano (CRYPTO: ADA) has skyrocketed, with the former up nearly 12% and the latter gaining nearly 17%, according to data provided by S&P Global Market Information. Litecoin (CRYPTO: LTC) and Electronic money (CRYPTO: FIL) were also in the double-digit club, with respective increases of 12% and 11%.
Is inflation melting?
This is the kind of reaction that happens when very favorable economic news hits the headlines. Cryptocurrency investors were thrilled with very positive data from the federal government’s Bureau of Labor Statistics released Thursday. The consumer price index (CPI), essentially a “basket” of prices, fell 0.1% in June from May, thanks in large part to significant drops in gasoline and other energy costs.
The core consumer price index, which excludes the often volatile prices of food and energy, rose 0.1%. Looking more closely, the core consumer price index rose 3.3% year-on-year in June.
All of these figures were significantly lower than most economists had predicted. More importantly, they suggest that inflation — that 300-pound beast that’s been sorely testing economic sentiment this decade — may be in serious retreat.
If inflation falls, the chances of the Federal Reserve cutting its key interest rates increase. After all, the reason the Fed started raising rates several years ago was to curb inflation. Fed officials have expressed a desire to cut rates, and with this new reading, they have a solid reason to do so.
Lower rates are a dream for cryptocurrency investors because, all else being equal, they encourage the market to buy riskier financial assets. Since most altcoins are volatile even at the best of times, they fit squarely into the higher-risk categories.
Keep them if you have them
Since this rally is based almost entirely on recent developments, I personally don’t expect it to last long.
However, the positive sentiment around cryptocurrencies and other risky stocks should persist, so this is a good time for those who already have altcoins in their portfolios to hold on to what they have, or even supplement it to some extent. Such assets could see a nice jump if and when the Fed gets out its pair of scissors, which is an increasingly likely possibility.
The story continues
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Eric Volkman has no position in any of the securities mentioned. The Motley Fool has a position in and recommends Cardano. The Motley Fool has a disclosure policy.
Why Altcoins Like Cardano and Shiba Inu Skyrocketed This Week was originally published by The Motley Fool