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Why Bitcoin, Ethereum and Bonk Collapsed Today
Volatility continues to be the name of the game in cryptocurrencies and today is no different. But unlike most of 2024, the market is working against investors today.
At 1:45 pm ET, the value of Bitcoin (CRYPTO:BTC) fell 2.8%, Ethereum (CRYPTO: ETH) is down 5.2%, and Good (CRYPTO:BONK) fell 9.4%. The move was influenced by a long holiday weekend in some parts of the world, but 24/7 cryptocurrency trading kept market speculation moving.
Image source: Getty Images.
Inflation strikes again
The data that most influences the market today is the ISM factory index, which improved by 2.5% in March to 50.3%. A reading above 50% indicates that manufacturing managers believe the manufacturing market is expanding. This followed 16 consecutive months of expected declines.
Investors interpret this as a sign that the economy is doing well, despite higher interest rates in recent years. If inflation is under control and the Federal Reserve doesn’t need to cut rates to help the economy, it may not cut them at all.
Bond traders are now weighing the odds of a June 2024 rate cut below 50%, which would have been a shock to start the year. Investors had expected up to six rate cuts and could make it through two quarters without any.
The decline of cryptocurrencies today
There is a correlation between technology, high-growth stocks and cryptocurrencies, and part of the upward movement over the past six months has been an anticipation of lower interest rates. As this thesis collapses, it is not unusual to see cryptocurrencies decline.
Bitcoin Exchange Traded Funds (ETFs) have been another catalyst and have brought billions of dollars into the industry. But last week they started seeing outflows, although these turned back into inflows towards the end of the week.
Ethereum has also received a boost from speculation that it will gain ETF approval in the coming months. But this is certainly not the case in the current regulatory environment.
If ETFs fail to serve as a catalyst because more are not approved, cryptocurrency values could decline.
Bonk’s move is just a mirror of the others with a little extra volatility added. This is a meme coin that has become a popular alternative to Dogemonetabut its main value is speculation rather than being a blockchain currency like Bitcoin or Ethereum.
Where do cryptocurrencies go from here?
I think the major catalysts of 2024 are already behind us. Bitcoin ETFs have helped increase awareness and investment in cryptocurrencies and this has pushed the entire industry higher. And speculation based on the economic backdrop and a potential rate cut appears to have been excessive.
The story continues
This leaves fundamentals driving the cryptocurrency market and is not a great place to be. Bitcoin may have value as “digital gold,” but I think it is more of a speculative asset than anything else. Ethereum’s promise has always been to provide real use cases in finance and digital assets, but it is so slow and much more expensive that other blockchains are gaining popularity.
The Bonk meme pop was cute, but meme coins never seem to last. And without a catalyst, I could see all three cryptocurrencies collapse in the coming months as investors search for more fundamental value in the market.
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Travis Hoium has positions in Ethereum. The Motley Fool has positions and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
Why Bitcoin, Ethereum and Bonk Collapsed Today was originally published by The Motley Fool