Why Altcoins Were Soaring on Wednesday

That loud and clear, collective sigh of relief you heard Wednesday was the sound of thousands of cryptocurrency investors, who were happy their assets generally moved in the right direction. Since Monday, the top names in the asset class had been sluggish at best; on Hump Day, many seemed to wake up.

More than a few altcoins that day were not only trading higher, but posting double-digit gains. Bitcoin Cash (CRYPTO:BCH) was something of an outlier in a good way, with a more than 23% rise. Utility coins Chainlink (CRYPTO:LINK) and Aptos (CRYPTO:APT) were up a respective 12% and nearly 15%. Lagging behind but still well in positive territory was Cardano (CRYPTO:ADA), with an 4% rise.

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Trading on an exemption, and a meeting

Much of this had to do with the latest developments in the fast-moving U.S. trade spat with Canada, Mexico, and China.

On Wednesday, President Donald Trump elected to grant a one-month exemption to the freshly introduced tariffs on imports from those countries, specifically to automobile manufacturers. These will affect Canada and Mexico, as their auto industries are closely intertwined with ours.

The exemptions have raised hopes that the potential economic fallout from the dispute will be more muted than some assumed. A calmer global market and economy is beneficial for cryptocurrencies, as they are relatively risky assets -- market players tend to pull away from such investments in times of stress or conflict.

On top of that, anticipation is building for Friday's White House Crypto Summit -- the first of its kind in the (admittedly brief) history of cryptocurrencies. Rumors that the Trump administration would formally launch a U.S. crypto reserve -- an initiative talked about rather vaguely so far -- gathered strength, injecting another measure of optimism into the crypto market in midweek trading.

It's important to note that any potential crypto reserve remains largely speculation at this point. While the concept has been floated and discussed, so far we have gotten very few details about the composition of such an instrument, or how it would work.

Hope springs (somewhat) eternal

So what we had on Wednesday was largely a rally on hope, rather than concrete developments. Yet hope was needed by a largely downbeat market, and in the absence of major hard, positive news, many opted to trade on optimism.

This alone likely won't sustain much of a rally. Instead, that'll depend on how these latest moves develop. A sustained trade war will likely be damaging to many asset classes, especially cryptocurrencies; contrarily, a fast end to the dispute should juice their prices. And if a crypto reserve is indeed inaugurated, investors might pull back if they deem the launch hasty and not well thought out.

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