Why Utility and Meme Coins Were Zooming Higher This Week

The seismic developments in U.S. politics and a Federal Reserve move beneficial to the asset class kept the cryptocurrency rally alive this week. Many types of coins and tokens were riding the wave, including oft-criticized meme coins and utility cryptos, even some of the more obscure ones.

Booking double-digit gains week to date as of early Friday morning, according to data compiled by S&P Global Market Intelligence, were Solana (CRYPTO: SOL) with a nearly 21% gain, Sui (CRYPTO: SUI) not far behind at almost 20%, and Uniswap (CRYPTO: UNI) increasing by over 17%. Frequently derided meme token Pepe (CRYPTO: PEPE), interestingly, was crushing them all with a rise of just under 24%.

Elections and rate cuts, oh my

In January, an administration will take power that has strongly indicated it will support cryptocurrencies in general. Crypto-heads loved what they heard from President-elect Donald Trump and incoming Bitcoin-owning vice president J.D. Vance, even if those pronouncements tended to be fairly vague and detail-free.

If there were no other news directly impacting digital coins and tokens, the rally in this ever-volatile asset class might have sputtered just after Trump was declared the victor. Happily for the market, the Fed swooped in with a crypto-boosting move of its own.

That was the regulator's 25-basis-point cut of its benchmark interest rate, for its second consecutive reduction. Fed officials had implied repeatedly they were going to trim rates, but not every investor was convinced this one was coming. The initial cut, of 50 basis points in September, was seen as assertive, to the point where some economists and market-watchers were thinking that it might be a one-off, at least for a while.

All things being equal, lower rates make assets considered to be risky -- hello, cryptocurrencies! -- more attractive, not least because they better compete with "safer" plays like bonds.

Sunny skies... for now

It was essentially a very effective one-two punch knocking cryptocurrencies of all kinds higher in value. The way ahead is clear and bright for such assets, at least as far as investors can see at the moment.

Can this last, however? Again, cryptos are volatile and I believe we'll start to see some robust profit-taking quite soon. I wouldn't be surprised if the market were hit with a correction at some point in the very near future, before hitting a kind of limbo while the world awaits the specifics of the new presidential administration's stance on cryptocurrency.

Regardless, these assets look as attractive as they ever have, so holding on to them for the long haul could be a smart move for investors.

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Eric Volkman has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin, SUI, Solana, and Uniswap Protocol Token. The Motley Fool has a disclosure policy.