News
Bitcoin drops by 6.3% and drags Ethereum and Dogecoin with it
Traders continue to sell Bitcoin ETF news.
The approval of the a Bitcoin (Bitcoin 2.56%) The ETF was expected to bring billions of dollars into the cryptocurrency sector, but, as usual, investors bought the rumor and sold the news. As of 2:30 pm ET, Bitcoin was down 6.3% over the past 24 hours, and selling accelerated early this morning.
Ethereum (ET 4.81%) has rallied in recent days, but fell 3.7% between 10 a.m. ET and 2:30 p.m. ET. Dogemoneta (DOGE 4.06%) has collapsed by 3.9% also in the last few hours.
Buy the rumors, sell the news
The Bitcoin ETF approval had been months in the making, and when these ETFs were announced on Wednesday, January 10, the market began to sell off. Many traders had bought into ETFs in anticipation (buying the rumor) and then started selling when there was no longer a catalyst to rely on for the future (selling the news).
To be fair, Bitcoin was flat last week, Ethereum was up 10%, and Dogecoin was down just 0.4%. So there wasn’t a lot of movement if you pull back a little bit.
I think it’s noteworthy that Ethereum has gained as much as it has. Speculative trading has arguably moved into the second largest spot cryptocurrencywhich could eventually become a popular ETF asset as well.
Technology takes it with the chin
Cryptocurrencies aren’t traded in a vacuum either. For the past three years, the cryptocurrency has been trading with high-growth tech stocks and they are having a terrible day.
Layoffs a Cloudflare, AlphabetDiscord and dozens of other companies are questioning the growth we should expect for 2024. In some parts of the tech industry there is still a belated realization that growth is slowing and that costs must be under control if companies are profitable.
This doesn’t necessarily have a direct impact on cryptocurrencies, but if cryptocurrencies are trading with growing tech stocks, it’s not surprising to see a sell-off.
What we don’t know matters most
The theory in the cryptocurrency space for the past few months has been that the approval of an ETF would bring new buyers into the cryptocurrency market, bringing with them billions of dollars. But will it be like this?
It seems to me that buying cryptocurrencies is quite easy for anyone who has wanted to purchase some in recent years. An ETF can make this easier in some ways, but it also comes with unnecessary fees for cryptocurrencies you can hold in self-custody.
I wouldn’t be surprised if cryptocurrencies continue to fall as the market realizes that new money isn’t coming in as expected following the approval of ETFs. And there is no greater use of blockchain for innovative purposes if the assets are held in an ETF.
This week has been more volatile than even a normal week in the cryptocurrency industry. Don’t be surprised if this is the theme of the next few weeks as the market figures out who is buying cryptocurrencies to hold and who is just speculating on ETF approvals. There may be more speculation going on than investors would like to think.
Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. Travis Hoium has positions in Alphabet, Cloudflare and Ethereum. The Motley Fool has positions and recommends Alphabet, Bitcoin, Cloudflare and Ethereum. The Motley Fool has a disclosure policy.