Why Bitcoin, Shiba Inu, and Dogecoin Are Rising Today
What happened
Many cryptocurrencies rose for a second straight day on Tuesday after a mixed inflation report on Monday and a Senate Banking Committee hearing on the future of crypto regulation.
Since late afternoon on Monday, shares of the world’s largest cryptocurrency, Bitcoin (BTC 3.69%), traded 2.5% higher as of 10 a.m. ET Tuesday. Meanwhile, meme tokens Shiba Inu (SHIB 5.51%) and Dogecoin (DOGE 4.50%) were up 4.9% and 3.9% respectively.
So what
Investors continue to digest January’s Consumer Price Index (CPI) report, which the Bureau of Labor Statistics released Monday. The CPI tracks the prices of a market basket of consumer goods and services, and is a key measure of inflation.
Image source: Getty Images.
In January, the CPI rose 0.5% from December and was up 6.4% year-on-year, coming in above what economists had expected. On a core basis – removing the more volatile prices from food and energy – the CPI rose by 5.6%. Expenses for shelter accounted for approximately half of the price increase in January. The report seemed mixed. Yes, there were some signs that inflation is easing, but it may not be a smooth process.
“This report will not change anyone’s opinion on the inflation picture; both hawks and doves will find something to cheer about,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a research note.
For crypto investors, the inflation outlook is key: If the Federal Reserve can bring it down, it will be able to stop raising interest rates. Higher prices have made riskier assets less attractive to investors, contributing to the collapse of crypto prices.
In other news, the Senate Banking Committee held a hearing on crypto regulation on Monday, and members’ mixed perspectives were evident on display. Senate Democrats expressed more concern about crypto as an asset class, and indicated more willingness to implement more restrictive frameworks around it. Senate Republicans want more limited regulation, and want to avoid discouraging crypto firms from basing themselves in the United States
Partisan gridlock in Congress is music to investors’ ears in this case; the division makes it less likely that a comprehensive overhaul of crypto regulation will be implemented in the short term. That could be seen as a relief after the Securities and Exchange Commission began cracking down on crypto firms last week, spooking investors.
In more minor news, The Wall Street Journal reported that crypto firm Celsius, which has filed for bankruptcy, has a deal in place to sell its retail platform to NovaWulf Digital Management. If the deal is approved, users who still have assets locked on the platform will be able to get back a fraction of their assets. Given that several crypto firms have filed for bankruptcy over the past few months, investors are likely happy to see at least one of these cases heading toward a possible resolution.
Finally, Twitter CEO Elon Musk recently tweeted a photo of his Shiba Inu dog Floki at his desk with the caption: “The new CEO of Twitter is amazing.” Musk is an ardent supporter of Dogecoin, and meme tokens tend to move higher when he tweets positively about them.
What now
Ultimately, I don’t think January’s CPI data gave the Fed much reason to consider ending the rate hike campaign early; I could see the Fed raising the benchmark federal funds rate at least one or two more times this year. The Senate Banking Committee’s hearing also made the regulatory picture uncertain. More restrictive and less friendly crypto regulations may still come.
I expect most cryptocurrencies to continue to bounce around for now. But I still like Bitcoin long term and have no interest in meme tokens.
