Cryptocurrencies rose today as the more friendly regulatory environment promised by President Donald Trump began to take shape, and as new economic data sent Treasury yields lower.
As of 1:10 p.m. ET today, the price of Ethereum (CRYPTO: ETH), the world's second-largest cryptocurrency, traded 4.2% higher from late afternoon yesterday. Meanwhile, the price of the meme tokens Dogecoin (CRYPTO: DOGE) and Shiba Inu (CRYPTO: SHIB) traded 1.7% and 5.1% higher, respectively.
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Changing regulatory tailwinds
Fresh economic data out today sent Treasury yields lower, which tends to benefit cryptocurrencies. The Institute for Supply Management reported that the Services Purchasing Managers' Index (PMI) in January fell by 1.3 points to 52.8. Analysts had expected the Services PMI to come in at 54.3 (any number above 50 indicates expansion). Still, the below-consensus number offers more evidence that inflation could be easing.
Under former President Joe Biden's administration, crypto stakeholders often complained about the lack of clarity provided by regulators, making it difficult to proceed on crypto businesses and ventures without worrying about potential enforcement. Part of Trump's promise on the campaign trail was that he would make the U.S. the crypto capital of the world. Those plans have begun to unfold and seem to have picked up steam over the last 24 hours.
David Sacks, the venture capitalist that Trump named to be the White House's crypto and artificial intelligence czar, told CNBC last night that he thinks stablecoin legislation could get through Congress within the next six months. At another press event yesterday, Sacks said, "I look forward to working with each of you in creating a golden age in digital assets."
Other agencies also seem to be officially shifting their stance on crypto. The Wall Street Journal reported today that the Securities and Exchange Commission (SEC) transferred its top litigator who had led the charge on several lawsuits against crypto exchanges to a new office more focused on information technology. Jorge Tenreiro had worked for a unit in the SEC that specifically prioritized crypto cases and enforcement.
Additionally, thanks to requests made under the Freedom of Information Act, the Federal Deposit Insurance Corporation (FDIC) released nearly 800 documents that showed banks requesting to provide crypto services in recent years were regularly met with pushback from the agency. "Looking forward, we are actively reevaluating our supervisory approach to crypto-related activities," FDIC acting chairman Travis Hill wrote.
Good signs for crypto
Moves by all of the agencies today further highlight how Trump and his administration is committed to supporting the crypto sector. Providing further regulatory clarity, removing personnel who previously took a hard line on crypto, and making it easier for financial institutions to interact with crypto and provide crypto services are all actions that bode well for the sector.
Additionally, further easing of inflation has historically benefited crypto, which tends to trade like tech stocks and therefore benefits from lower interest rates. The next clue on inflation will come on Friday when the government unveils January's non-farm payrolls report.
While most of the crypto sector will likely continue to move higher as long as the crypto bull market stays intact, I only like Ethereum of these three cryptocurrencies because of its strong technical network and many use cases that should create demand for Ethereum tokens. I currently have no interest in Dogecoin or Shiba Inu.
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Bram Berkowitz has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
