Why Bitcoin, Ethereum, and Dogecoin Jumped Today

Bitcoin (CRYPTO: BTC) is climbing again on Monday after MicroStrategy continued its massive buying spree. This time, the company announced another 1,070 Bitcoin acquired over the past week and said it will be raising another $2 billion to buy even more.

Investors have been pouring back into higher-risk assets like cryptocurrencies and growth stocks to start trading in 2025 and that continued today. As of 4 p.m. ET, over the past 24 hours, Bitcoin is up 4%, Ethereum (CRYPTO: ETH) has climbed a more modest 1.1%, and Dogecoin (CRYPTO: DOGE) is up 1.4%.

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Bitcoin's big buyer

MicroStrategy has been implementing what it refers to as a Bitcoin yield strategy, which involves issuing stock and debt in order to buy Bitcoin. If the value of MicroStrategy's stock is in excess of the value of Bitcoin held on the balance sheet the company can issue stock to buy Bitcoin, increasing the amount of Bitcoin held per share. This is what it calls "yield."

That's why MicroStrategy has been such a big buyer of Bitcoin in recent weeks. The stock's price is over double the value of Bitcoin per share, which means the company can increase the "yield" rapidly. In 2024, the company had a 74.3% Bitcoin yield, according to management.

What's not clear is how long MicroStrategy's stock will maintain a premium to its underlying Bitcoin assets or what the downside risk is if MicroStrategy stops buying. With such a big buyer in the market, investors know there's always a buyer in MicroStrategy, but that momentum may reverse if the stock falls.

Ethereum and Dogecoin ride the wave

There isn't any huge news driving Ethereum or Dogecoin, but that's not surprising given the recent price action for cryptocurrencies. The flow of funds into the industry has been the biggest driver of value appreciation.

What investors should watch over the next year is the improvement in utility for these tokens, which is much more likely to drive value than the memes or non-fungible tokens (NFTs) that drove the last cycle.

Leading crypto firms and cryptocurrencies have already been discussing plans to increase utility under the Trump administration, which takes over this month. If regulatory clarity is achieved, the industry could go from the Wild West trading during the peak of the COVID-19 pandemic to more fundamental innovations on the blockchain, like disrupting the global payment and financial infrastructure. But having a blockchain that's fast and cheap will be key. I'm not sure Ethereum or Dogecoin fall into that category.

Will trading momentum fade in 2025?

Cryptocurrencies have traded more correlated to growth stocks than as a hedge to inflation or economic activity, as they were sold prior to the pandemic. In that sense, the rising value of stocks has also led to a jump in crypto valuations.

But we've seen this story before and the euphoria of 2021 led to a crash in 2022. This could be a similar cycle for cryptocurrencies and there's now more money involved and more leverage in the system from players like MicroStrategy.

I'm looking at crypto cautiously today and would be looking to take a profit on days like this more than buying the bounce higher in token values.

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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.