There’s a big question many investors are asking right now: Why is crypto going up today?
Indeed, this simple question is a difficult one to answer. However, on a day when most top coins and tokens including Bitcoin (CCC:BTC-USD), Ethereum (CCC:ETH-USD), Cardano (CCC:ADA-USD) and XRP (CCC:XRP-USD) are up more than 5%, it’s a valid one.
Most of these top cryptos have been in what investors call a “crypto winter.” Declines of more than 50% from last year’s peak are commonplace in this world. And each of these coins and tokens has exhibited such declines of late. Expectations that more hawkish monetary policy could result in rising rates have hurt risk assets across the board. Generally speaking, cryptocurrencies have traded in close correlation with stocks. Those following high-growth tech stocks will notice that near-50% declines are commonplace there as well.
However, today’s impressive recovery suggests there’s something driving outsized bullish momentum. Given we haven’t seen this momentum materialize in some time, these upside moves are shocking.
Let’s take a look at what may be driving crypto higher today.
Why Is Crypto Going Up Today?
When most investors think of cryptocurrencies, Bitcoin is often the first coin that comes to mind. The leading digital asset, the price of Bitcoin sets the stage for the overall market.
Today, the price of Bitcoin breached a key psychological barrier. With this token crossing the $40,000 mark, investors once again have bull fever.
However, looking at the macroeconomic conditions, not much has changed. Interest rates are still expected to rise. There’s inflation, and a strong economy furthering this thesis. And speculative money is largely flowing into defensive assets.
So what’s happening? It seems price action among key tech stocks such as Amazon (NASDAQ:AMZN) following the company’s blowout earnings has shifted sentiment significantly. Accordingly, a risk-on approach has seeped back into the market, with investors buying all sorts of dips today. In the crypto world, there are many dips to buy.
Whether this momentum can be sustained or not remains to be seen. However, this near-term shift is worth noting.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
