Cryptocurrencies have been on a wild ride the last few weeks as everything from interest rates to Elon Musk’s takeover of Twitter have caused volatility in the market.
On Friday, trading seemed to settle into a more normal place with industry leaders climbing. As of 2:40 p.m. ET, Ethereum (ETH 6.11%) led the charge by climbing 6%, Bitcoin (BTC 3.60%) was up 3.5%, and Dogecoin (DOGE -2.73%) was up 2.2%.
The stock market is up today on some positive earnings reports in the last 24 hours and hope that any future recession won’t be too damaging to revenue and profits. Some stocks are falling because management hasn’t controlled costs, but revenue numbers don’t seem to be concerning investors right now.
Nonfarm payrolls also increased 261,000 in October, according to a report from the Labor Department this morning, which is also leading investors to think the economy is in good shape.
Risk stocks and investments like cryptocurrencies are rising as a result. But there may be some more fundamental news to think about.
Twitter has reportedly stopped the development of a crypto wallet, which could have been used to make it easier to use crypto on the social network. This is notable for Dogecoin because the token’s value has risen more than 100% since Elon Musk completed his purchase of Twitter.
The other notable news item was Coinbase (COIN 5.41%) reporting a fairly strong quarter Thursday after the market closed. Coinbase cut spending dramatically and looks like it has years worth of cash to survive the crypto winter, which means one of the most visible companies in the industry will remain relatively strong. That’s about as bullish as news gets in crypto markets right now.
Today is normal volatility in crypto, but the notable change over the last few months is how big companies are beginning to take cryptocurrency more seriously. Reddit, Twitter, and Starbucks have all expanded their activity in cryptocurrencies and that’s very bullish for the future of the industry.
I think Coinbase’s results are giving investors a lot more confidence as well. The cost structure of companies like Coinbase just needs to come down to a level where they can survive the current crypto winter and build the products to grow when activity picks up. And if corporate interest is any indication, the recovery may come sooner than many people expect.
This isn’t the kind of day that’s going to make me buy cryptocurrencies because I don’t see a lot of fundamental change in the market. But slow and steady increases in adoption by users and corporations will be a good sign for valuations long term. It may not be Bitcoin or a meme coin like Dogecoin that benefits from this development, but I think Ethereum has a chance to be a foundational piece of the future of cryptocurrency.
Travis Hoium has positions in Coinbase Global, Inc. and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, Inc., Ethereum, and Starbucks. The Motley Fool recommends the following options: short January 2023 $92.50 puts on Starbucks. The Motley Fool has a disclosure policy.