Altcoins
Why Altcoins Like Cardano and Shiba Inu Soared This Week
Sometimes the cryptocurrency market seems like a pack of wolves or a school of fish, a group of individuals acting in concert, in response to an event. This week was one of those times, with positive macroeconomic developments encouraging the crowd to move higher. About 20 altcoins posted double-digit gains over the week. Investors didn’t seem to discriminate by currency type or function.
As a result, cryptos as diverse as meme coins Shiba Inu (CRYPTO: SHIB) and smart contract platform Cardan (CRYPTO:ADA) has soared, with the former increasing nearly 12% and the latter gaining nearly 17%, according to data provided by S&P Global Markets Insights. Litecoin (CRYPTO: LTC) and Filecoin (CRYPTO: FIL) are also in the double-digit club, with increases of 12% and 11% respectively.
Is inflation disappearing?
It’s the kind of reaction that happens when very favorable economic news hits the headlines. Cryptocurrency investors were excited by very positive data from the federal government’s Bureau of Labor Statistics, released Thursday. For June, the consumer price index (CPI), essentially a “basket” of prices, fell 0.1% from May, largely thanks to a notable drop in the cost of gasoline and other energy.
The “core” CPI, which excludes often volatile food and energy prices, rose 0.1%. Stepping back a bit, the core CPI rose 3.3% year-on-year in June.
All of these numbers are significantly lower than most economists had expected. More importantly, they suggest that inflation — that 300-pound beast that has weighed on economic sentiment this decade — could be in serious decline.
If inflation falls, the chances of the Federal Reserve cutting its key interest rates increase. After all, the reason the Fed began raising rates several years ago was to curb inflation. Fed officials have indicated their willingness to cut rates, and with this new report, they have a good reason to do so.
Lower interest rates are a cryptocurrency investor’s dream because, all things being equal, they encourage the market to buy riskier financial assets. Since most altcoins are volatile at the best of times, they fall squarely into the high-risk categories.
Keep them if you have them.
Given that this rally is based almost entirely on recent events, I personally don’t expect it to last very long.
The positive sentiment around cryptocurrencies and other risk assets is likely to persist, however. This makes it a great time for those who already have altcoins in their portfolio to hold on to what they have, or even add to them to some extent. These assets could see a nice rally if and when the Fed pulls out its scissors — which is an increasingly likely possibility.
The story continues
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cardano. The Motley Fool has a disclosure policy.
Why Altcoins Like Cardano and Shiba Inu Soared This Week was originally published by The Motley Fool