What happened
The price of several cryptocurrencies moved higher today after the Federal Reserve concluded its March meeting yesterday, as well as due to some token-specific news.
Since late afternoon yesterday, the price of the world’s largest cryptocurrency, Bitcoin (BTC -0.85%), traded about 4.8% higher as of 12:02 p.m. ET today, with Bitcoin above $28,700. Meanwhile, the price of XRP (XRP 1.57%) traded roughly 7.2% higher, and the meme token Dogecoin (DOGE 1.08%) was up close to 8%.
So what
The Fed concluded its meeting yesterday with a quarter-point hike to interest rates, bringing the Fed’s overnight benchmark lending rate, the federal funds rate, to inside a range of 4.75% and 5%. The Fed also seemed to take a more dovish tone and indicate that its rate-hiking campaign may soon come to an end.
Image source: Getty Images.
Bitcoin and the rest of the crypto market have been pummeled since the Fed began raising interest rates to combat some of the highest levels of inflation seen in about four decades. Rising interest rates have made short-term U.S. Treasury bills attractive to invest in, as well as riskier assets like Bitcoin much less favorable.
While the Fed had been a lot more hawkish earlier this month, the recent bank crisis, which resulted in several banks collapsing, has softened its tone. The main reason for this change is that banks are likely to tighten credit in the upcoming months as they further monitor liquidity and also brace for credit normalization in their existing loan portfolios. Fed Chairman Jerome Powell said during his press conference yesterday that this may have a chilling effect on the economy, doing some of the Fed’s work for it.
Dogecoin seems to be benefiting from a tweet from Twitter CEO Elon Musk, who responded to another tweet from a user about visiting the U.S. and watching SpaceX’s upcoming Starship launch. “Okay, but it will cost 3 Doge,” Musk replied.
That seemed to incite some belief that Musk will eventually incorporate crypto payments into Twitter, including Dogecoin. Given Musk’s influence over the Dogecoin community, it is not surprising to see investors getting excited over a Musk tweet.
XRP seems to be benefiting from the belief that a court ruling is soon coming in a closely followed 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 many years ago. Many believe Ripple will win the case, setting a precedent that will make it harder for the SEC to classify many cryptocurrencies as securities, which has been a long-running debate between the crypto community and SEC.
Now what
I think the move among cryptocurrencies is largely because of the belief that the Fed will soon pivot and that interest rates are not going to rise to 6%, which seemed like a possibility prior to the banking crisis. Cryptocurrencies, which were started in response to the Great Recession and wider distrust in the mainstream financial system, also tend to rise when traditional banks or currencies like the U.S. dollar struggle.
I believe Bitcoin is going to be here for the long haul and will be a good long-term buy. I do think XRP and its network have some interesting capabilities and could stand to benefit from winning the SEC case. That said, I have no interest in Dogecoin because I don’t think the cryptocurrency or blockchain network offers anything particularly unique.