Why Altcoins Like Cardano and Shiba Inu Rocketed Higher This Week

At times, the cryptocurrency market essentially looks like a wolf pack or a school of fish — a collection of individuals acting together in response to an event. This week was one of those times when positive macroeconomic developments encouraged the crowd to push higher. A number of altcoins made double-digit gains for the week. Investors don’t seem to discriminate based on coin type or function.

As a result, several cryptos, such as meme coin Shiba Inu (CRYPTO: SHIB) and smart contract platform Cardano (CRYPTO: ADA), soared with the former gaining almost 12% and the latter almost 17%, according to data provided by S&P Global Market Intelligence. Litecoin (CRYPTO: LTC) and Filecoin (CRYPTO: FIL) were also in the double-digit club with gains of 12% and 11%, respectively.

Is inflation melting?

This is the type of reaction that occurs when very positive economic news makes headlines. Crypto investors were excited by the very positive data released by the federal government’s Bureau of Labor Statistics on Thursday. In June, the consumer price index (CPI), which is essentially a “price basket,” fell 0.1% since May, largely thanks to significant declines in the cost of gasoline and other energy.

The “core” CPI, which strips out the often volatile food and energy prices, rose 0.1%. Zooming out a bit, the core CPI rose 3.3% annually in June.

All of these figures were significantly lower than most economists had predicted. More importantly, they suggest that inflation — the 300-pound monster that has been battering economic sentiment this decade — may be in serious decline.

If inflation falls, the Federal Reserve has a better chance of cutting key interest rates. After all, the reason the Fed started raising rates a few years ago was to reduce inflation. Fed officials have indicated a desire to lower rates, and with this new reading, they have a solid reason to do so.

Lower rates are a dream for crypto investors because, all things being equal, they encourage the market to buy riskier financial assets. Since most altcoins are volatile at the best of times, they fall squarely into the high-risk categories.

If you have them, keep them

Because almost all of this rise is based on recent developments, I personally do not expect it to last very long.

Still, the positive sentiment around cryptocurrencies and other risky plays should continue, so now is a good time for those who already have altcoins in their portfolios to hold on to them or even top them up to some extent. Such assets could see a nice pop when the Fed removes its scissors — an increasingly likely possibility.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has a position in Cardano and recommends Cardano. The Motley Fool has a disclosure policy.

The article Why Altcoins Like Cardano and Shiba Inu Are Soaring This Week was originally published by The Motley Fool