Why Bitcoin, Coinbase, and Riot Platforms Are Moving Higher Today

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What happened

The price of several cryptocurrencies and crypto-related stocks rose today for no apparent reason, but as investors braced for new economic data and the start of earnings season later this week.

Since late afternoon yesterday, the price of the world’s largest cryptocurrency, Bitcoin (BTC 3.24%), was trading up 3.8% at 3:37 p.m. ET today .

Meanwhile, shares of major crypto exchange Coinbase Global (COIN 7.63%) traded up 5.5% during normal trading hours, while shares of Bitcoin miner Riot Platforms (RIOT 15.50% ) traded up almost 15%.

So what

Because the markets were closed on Friday, the market was unable to react to the March jobs report until today. The US economy added 236,000 jobs in March, which represents a slowdown in hiring and was in line with estimates. However, the unemployment rate fell to 3.5% as the participation rate increased.

Image source: Getty Images.

Still, it’s been a good month for hiring, and following the report, traders increased their bets that the Federal Reserve would raise interest rates at its May meeting. Rising interest rates crushed Bitcoin in 2022.

Yet in another report released today by the Federal Reserve Bank of New York, consumers said access to credit in March got tougher and was the toughest since 2014. Since the start of banking crisis, banks are expected to tighten credit, which could chill the economy and potentially even trigger a recession. This could prompt the Fed to cut interest rates, which has always been good for riskier assets like Bitcoin.

Additionally, Bernstein analysts said today in a research note that growing investor interest in gold should also lead to increased interest in Bitcoin. Analysts said they saw more investors expecting a hard landing in the economy, which would trigger rate cuts and a weaker dollar, leading them to start favoring gold as the blanket.

“When there is a massive currency depreciation event, as Bitcoin and Gold rally, Bitcoin outperforms Gold,” the analysts wrote. “For example, post-Covid money printing, Bitcoin has outperformed gold (2.9x over ~3.5 years). In fact, even this year, since fears of the banking crisis escalated, Bitcoin is up about 71% YTD vs. gold up about 10% YTD.”

When Bitcoin trades, other crypto stocks tend to follow. Coinbase is benefiting from increased trading activity in cryptocurrencies, while Riot is benefiting because the asset the company is mining, Bitcoin, is rising in value.

Now what

I think the economic data has been somewhat mixed recently. Traders have been anticipating rate cuts this year, which would likely favor Bitcoin and crypto, but Friday’s jobs report also suggests inflation has yet to be brought under control. The Fed is now expected to hike another quarter point at its May meeting.

Still, key new inflation data will be released on Wednesday, followed by the start of bank earnings on Friday. Both of these events could still change the Fed’s trajectory, so you’ll want to watch them.

While I expect some volatility, I think Bitcoin is a cryptocurrency that deserves at least some exposure, and I would expect Bitcoin to benefit from a weaker dollar or a drop in rates. Currently, I’m not interested in Coinbase or Riot due to the improved regulatory environment around crypto companies, although both will likely benefit if Bitcoin goes up. I just prefer bitcoin.

Bram Berkowitz has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.

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