Why Bitcoin, Ethereum, and Dogecoin Rallied on Friday

Are we finally reaching a point of stability in the market after an insanely volatile 10-day stretch? The crypto market seems to think so, with Bitcoin (CRYPTO: BTC) up 5.2% over the past 24 hours as of 1 p.m. ET, Ethereum (CRYPTO: ETH) up 4.6%, and Dogecoin (CRYPTO: DOGE) rising 5.3%.

The stock market has gained as well on what seems to be hope that rising bond yields and a falling dollar will lead to the Trump administration finding a path away from the trade war that's currently unfolding.

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Investors are taking a "risk on" mentality going into the weekend, which often happens when news of trade talks or deals takes place while the market is closed.

It's not clear if there will be any deals, and last weekend was unusually quiet, but that's part of the reason stocks are moving higher today. Cryptocurrencies have followed, as they often do, but the pop in values may be short-lived.

Data tells a different story

We're starting to get early signs of how consumers and businesses are viewing the tariff plans, and the early data isn't good. A University of Michigan survey of consumer sentiment fell from 57.0 a month ago to 50.8, which is nearly as low as the index got during 2020.

Expectations for inflation jumped to 6.7%, up from 5% a month earlier and the highest in more than four decades.

Normally, weak consumer sentiment and higher inflation expectations would cause investors to flee to safety, but the opposite is what's happening today.

Crypto is stuck in the middle

What's interesting about where crypto sits is that it's the one asset class that's traded 24/7. So, equity investors may be preparing for Monday, but crypto traders will see the impact of any deal or any lack of deals over the weekend. That could make for extremely volatile trading.

Whether you're looking at the stock market or the crypto market, it's nearly impossible to predict what's going to happen next.

History says the next leg may be down for crypto

The worries I would have for the crypto market is the economy slowing in the U.S., and that extending to risky assets like cryptocurrencies. Economists have increased their odds of a recession in 2025, and it's very possible we're already in one.

We also have a rush of earnings data coming over the next few weeks as companies both reveal what happened in the first quarter and give their outlook for the rest of 2025. If that outlook is weak, we may see equities and crypto fall.

Consumer sentiment is the most worrying when combined with the rise in interest rates over the past week. If both those trends continue, a recession could be a self-fulfilling prophecy.

History says that will negatively impact cryptocurrencies, which trade more with growth stocks than as a hedge to inflation or the dollar. So, this could be a short-term reprieve from a long-term downward trend for the market.

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Travis Hoium has positions in Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.