What happened
The crypto bulls were back out in force this week as altcoins across the industry bounced higher. According to data provided by S&P Global Market Intelligence, Fantom (FTM 5.25%) popped 33.5% from last Friday's end of trading to noon ET today, Arweave (AR 7.36%) was up 20.5% in that same period, and Decentraland (MANA 5.36%) jumped 14.2%. This was even after a pullback in crypto values early in trading on Friday.
So what
The Federal Reserve was driving risk assets higher in trading this week. The short-term Treasury bill's interest rate was only increased by 25 basis points, and officials indicated that future increases might not happen as quickly as once feared.
CRYPTO: AR
Key Data Points
Investors are concerned about interest rates because that's how they discount cash flow, particularly for stocks. Lower rates put a higher value on long-term cash flows, which pushes stock values higher. Crypto has traded in a manner correlated with growth stocks, so it's no surprise that both are up this week.
Arweave said that transactions were up 80% sequentially in January to an all-time high, indicating that its services are in high demand. The non-fungible token (NFT) trading community that uses blockchains like Arweave has become more active, and that trend could continue.
Decentraland's move is part of a broader bullish metaverse shift in 2023. Many metaverse-related tokens are jumping, and that's likely because the metaverse itself is much more within sight now than it was during the last bull market run of 2021 and early 2022.
Metaverse experiences are getting better all the time, although usage remains low, with only about 1,000 people using Decentraland on a daily basis.
CRYPTO: MANA
Key Data Points
Now what
As much as the run higher this week has been great for investors, the drivers have been mostly speculation. Lower interest rates don't actually drive demand for cryptocurrencies or the metaverse, so the market pop could easily fade over time.
That said, there is an increase in activity on the blockchain in the last few months. The lows felt after FTX collapsed have been replaced by more bullishness as developers build projects and the market starts to come to life.
Many of the businesses and tokens that provided little utility are still down big, but the developers building long-term value have shown they aren't going anywhere.
I would be careful buying into the hype in most altcoins because it's an area that can be very volatile. But projects like Arweave that are building real utility could be great long-term holds.
The blockchain has become one of the most common methods for storing data in a decentralized manner, and that's something that has lots of use cases in Web3. It'll be a volatile ride, but out of these three, Arweave is the one I see with the brightest future.
