Ethereum
Why Bitcoin, Ethereum and Bonk plunged today
Speculative assets are down to start the week.
Volatility continues to be the 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 p.m. ET, the value of Bitcoin (BTC 0.34%) fell by 2.8%, Ethereum (ETH -0.11%) is down 5.2%, and Bonk (BONK 0.08%) fell 9.4%. The move was impacted by a long holiday weekend in parts of the world, but 24/7 crypto trading kept speculation in the market.
Image source: Getty Images.
Inflation hits again
The most important data point impacting the market today is the ISM Factory Index, which improved 2.5% in March to 50.3%. A score above 50% indicates that manufacturing executives believe the manufacturing market is growing. This follows 16 straight months of expected declines.
Investors view the figure as a sign that the economy is doing well, despite rising 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 might not cut rates at all.
Bond traders are now pricing in a June 2024 rate cut at less than 50%, which would have been a shock at the start of the year. Investors were expecting six rate cuts, and they could go two quarters without any.
The decline of crypto today
There is a correlation between technology and high-growth stocks and cryptocurrencies, and part of the rise over the past six months has been driven by anticipation of lower interest rates. As this thesis crumbles, it is not uncommon to see cryptocurrencies fall.
Bitcoin exchange-traded funds (ETFs) were another catalyst and brought billions of dollars to the industry. But last week, they started seeing capital outflows, although these turned into inflows again at the end of the week.
Ethereum also benefited from speculation that ETFs would be approved in the coming months. But this is not certain in the current regulatory context.
If ETFs are not a catalyst because others are not approved, crypto values could fall.
Bonk’s move is just a mirror of the others with some extra volatility added. This is a meme coin that has become a popular alternative to Dogecoinbut its main value is speculation rather than being a blockchain currency like Bitcoin or Ethereum.
Where does crypto go from here?
I think the main catalysts for 2024 are already behind us. Bitcoin ETFs have helped increase awareness and investment in crypto, which has lifted the entire industry. And speculation based on the economic environment and a possible rate cut appears to have been exaggerated.
This leaves fundamentals to drive the crypto market and that’s not an ideal place to be. Bitcoin may have value as “digital gold,” but I think it’s more of a speculative asset than anything else. The promise of Ethereum has always been to provide real-world use cases in finance and digital assets, but it’s so slow and so much more expensive that other blockchains are gaining popularity.
The Bonk meme pop has been cool, but the meme pieces never seem to last. And without a catalyst, I could see all three cryptos falling over the next few months as investors look for more fundamental value in the market.
Travis Hoium has positions in Ethereum. The Motley Fool posts and recommends Bitcoin and Ethereum. The Mad Motley has a disclosure policy.