The market bid up cryptocurrencies this week ahead of President Trump's inauguration, which could change the industry's landscape. We know the lead regulators at the Securities and Exchange Commission (SEC) will be replaced, and a friendlier Congress could also help the industry.
According to data provided by S&P Global Market Intelligence, XRP (CRYPTO: XRP) was up as much as 43.2% since last Friday's stock market close and is currently up 37.3%. Hedera (CRYPTO: HBAR) jumped 41% and settled in at a 31.4% gain for the week, and Stellar (CRYPTO: XLM) was up 20% at its high and is now trading up 14.3%.
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The crypto landscape is changing
No cryptocurrency has felt more heat over the past four years than XRP, which was one of the SEC's first targets. But the company fought off those legal battles and has become something of a cult cryptocurrency as regulatory changes hit.
To show the momentum we have seen, Coinbase (NASDAQ: COIN) said there was more trading volume on the XRP/USD trading pair than the Bitcoin (CRYPTO: BTC)/USD trading pair. That's an incredible level of interest from investors, especially in the U.S.
We've known since the election that crypto would get a friendlier regulatory and legislative environment over the next four years, and XRP is seen as a winner of that. Whether it's worth being the third-most valuable cryptocurrency in the world is yet to be seen.
Hedera's utility play
Hedera has benefited from speculation that it could get its own exchange-traded fund (ETF), which may bring more funds into the token. Although, investors should keep in mind that Bitcoin ETFs were the only ones to be a market mover for investors.
The project did get some good news recently when it announced a partnership with gemstone-certification giant World Gemological Institute and Vaultik to tokenize $3 billion of diamonds and other goods on the blockchain. Denoting ownership on the blockchain is a great use case for cryptocurrencies, and this could be one of the most valuable use cases long-term.
Trading correlation is helping all cryptocurrencies
Stellar is up big in large part because it's tightly correlated with XRP. Some investors see it as a cheaper alternative to XRP because it was founded by one of XRP's co-founders. Stellar itself has even called itself a cousin to XRP. Both blockchains are built to enable fast, cheap transactions, so more use of the blockchain would be good for both.
As much as trading has helped cryptocurrencies over the past three months, investors should be cautious about buying the rumor from here. The moves higher have been fast and furious, and we don't know what new regulations will look like or how they will help value accrue to existing cryptocurrencies.
I think we will see a lot of innovation on the blockchain over the next four years, but stablecoins and non-fungible tokens may play a big role, not just cryptocurrencies. The winners may not be who we expect, so caution is the name of the game today.
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Travis Hoium has positions in Coinbase Global. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, and XRP. The Motley Fool recommends Hedera Hashgraph. 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.
