After a week of downward trend, Bitcoin (Cryptocurrency: BTC), Ethereum (Cryptocurrency: ETH)and dogecoin (Code:Doge) It soared in Friday morning trading.
As of 3pm ET, Bitcoin was up 4.1% compared to yesterday's stock market close, Ethereum was up 2.6%, and Dogecoin was up 5.6%. And they all operated on the same information.
Unemployment data and cryptocurrencies
The moment the US Department of Labor released the April 2024 employment statistics, the value of cryptocurrencies soared. The United States added 175,000 jobs last month, and the unemployment rate rose slightly to 3.9%.
Economists had predicted 235,000 new jobs and an unemployment rate of 3.8%.
Markets often react only to headline reports, although initial data may be revised. And that is exactly what happened with the crypto market reaction just seconds after this report was released.
Will unemployment really affect cryptocurrencies?
The question is, what does this news have to do with cryptocurrencies? Many market participants believe a weakening economy means the Federal Reserve will cut interest rates more quickly. Currently, interest rates are expected to be cut in September, but if the inflation rate remains high, there is a possibility that there will be no rate cut this year.
Lower interest rates can stimulate economic activity, so there is a need to strike a balance between keeping interest rates high in the event of an economic downturn.
It is also questionable whether rates actually have a significant impact on cryptocurrencies. Barring further speculation, in most cases, lower interest rates do not have a fundamental impact on the crypto market.
Rising rates are bad for crypto memes
Bitcoin has solidified itself as a type of digital gold, and Ethereum is generally known as a more practical blockchain with many scaling solutions, but if interest rates stay where they are and the economy takes a turn for the worse, Dogecoin may be most affected.
Dogecoin is a meme coin with no real utility, and it will be difficult to maintain its meme status if people have less money to spend on speculative assets. I think that explains the reaction today.
While this is part of the normal fluctuations in crypto markets, it also highlights how the meme that started in 2020 may end up being less powerful.
Be careful with today's cryptocurrencies
Despite rising interest rates and signs of a weakening economy, the crypto market is set to crash in 2024. The approval of Bitcoin exchange traded funds (ETFs) in the US also provided a tailwind.
However, some of the market tailwinds may be starting to subside, which could be bad for valuations in the long run unless the utility of cryptocurrencies increases significantly. Bitcoin prices have been rising since the recent halving, and Ethereum hasn't proven to be very cost-effective either.
Dogecoin has little utility and has been focused on its shifting meme status.
I believe that days like this are a good time to take the chip off cryptocurrencies, as the market is telling us that economic fundamentals will weaken going forward. Like it or not, the economy and the Fed remain the biggest drivers of cryptocurrencies in the long run.
Should you invest $1,000 in Bitcoin right now?
Before buying Bitcoin stocks, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks Things investors can buy right now…and Bitcoin wasn't among them. These 10 stocks have the potential to generate impressive returns over the next few years.
when to think about it Nvidia This list was created on April 15, 2005…if you invested $1,000 at the time of recommendation. you have $525,806!*
stock advisor provides investors with an easy-to-understand blueprint for success, including guidance on portfolio construction, regular updates from analysts, and two new stocks each month.of stock advisor For the service more than 4 times The resurgence of the S&P 500 since 2002*.
See 10 stocks »
*Stock Advisor will return as of April 30, 2024
Travis Hoium has a position in Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
“Bitcoin, Ethereum, Dogecoin make massive recovery on Friday” was originally published by The Motley Fool
