Ethereum
Why Bitcoin, Ethereum, and Dogecoin Are Losing Ground Today
Price action in the cryptocurrency world has been wild today, with many of the biggest tokens that investors are watching closely seeing big drops over the past day. As of 3:30 p.m. ET Tuesday, Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH) and Dogecoin (CRYPTO:DOGE) is down 3.9%, 4.9% and 5.3% respectively over the past 24 hours.
These moves appear to be the result of a shift in the narrative in the cryptocurrency world. As more investors focus on fund flows into the asset class, there is greater recognition of the supply and demand for capital flows into the sector.
As a result, capital is flowing into spot Bitcoin ETFs, such as the Grayscale Bitcoin ETF (NYSEMKT: GBTC) have become a much more relevant focal point for Bitcoin and the entire industry in general.
Today’s reports that this particular Bitcoin spot ETF (and others) have seen significant outflows appear to be driving the majority of the moves in these top three cryptocurrencies. The Grayscale ETF led the way lower, posting an outflow of $643 million on Monday, with more expected to be reported today.
Let’s dive into this particular catalyst, as well as other concerns investors are factoring into Ethereum and Dogecoin right now.
Why this change of feeling?
Capital flows into spot ETFs are not the only story, but they are the main one in the crypto space right now. With various Bitcoin spot ETFs such as Grayscale’s seeing record inflows in such a short period of time, the anticipation of an emerging supply-demand dislocation in the Bitcoin market has forced other speculative retail capital into the space. For higher-risk assets such as Dogecoin, this has led to what can only be described as a hype-driven rally.
There have also been some recent Elon Musk’s comments on the potential integration of Dogecoin into the You’re here buying ecosystem. We’ll have to see if that comes to fruition or not, but it’s clear that Dogecoin’s primary purpose is to be a speculative trading vehicle for those willing to take on abnormally high risks. In this market, that’s worked out well for the bulls.
For Ethereum, anticipation around upcoming deadlines for the Securities and Exchange Commission to review spot ETF applications from companies like Grayscale and others continues to be a driving factor for the token.
That said, if outflows from Bitcoin spot ETFs continue, this catalyst could become questionable. As such, investors will undoubtedly get ahead of the catalyst by pricing in expectations, and we will likely see Ethereum move somewhat in line with Bitcoin until a decision is made.
The story continues
Where to go from here
Investors who decided to jump on the cryptocurrency bandwagon before this flood of speculative capital hit the sector have certainly done well. And while we’ve seen some recent outflows from funds like the Grayscale Bitcoin ETF and others, it’s also true that these ETFs have assets under management that many thought they wouldn’t have at this point in the cycle. So it’s really a matter of perception right now as to how the Bitcoin market is finding its footing.
For Ethereum and Dogecoin, I expect to see a similar correlation with Bitcoin for a while, until we see the impact of the upcoming Bitcoin halving and potential Ethereum spot ETF approvals. Until then, fasten your seatbelts — it’s likely to be a thrilling ride.
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Chris MacDonald has positions in Ethereum. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Tesla. The Motley Fool has a disclosure policy.
Why Bitcoin, Ethereum, and Dogecoin Are Losing Ground Today was originally published by The Motley Fool