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Why Bitcoin, Ethereum and Dogecoin Collapsed Today
THE cryptocurrency market has had momentum throughout the year, but that appears to be coming to an end as April ends. The entire market is down, but the bigger names are leading the way.
Bitcoin (CRYPTO:BTC) is down 4.7% since Monday’s stock market close, Ethereum (CRYPTO: ETH) is down 6.5%, and Dogemoneta (CRYPTO: DOGE) fell 6.1%. And this week continues with the tokens down 9.7%, 8.1% and 18.2% over the last seven days.
Cryptocurrency ETFs have reached saturation
When Bitcoin Exchange Traded Funds (ETFs) hit the market in the United States, they brought billions of dollars in new investments into the sector, and Bitcoin soared, taking the entire market with it. But this did not happen in Hong Kong.
Bitcoin and Ethereum ETFs were introduced yesterday in Hong Kong and on the opening day only $8.5 million in Bitcoin ETFs and $2.5 billion in Ethereum ETFs were traded. This could indicate that appetite for crypto ETFs is fading.
The fate of the founder of Binance
The other cloud hanging over cryptocurrencies is the sentencing of Binance founder Changpeng “CZ” Zhao in Seattle. He pleaded guilty to violating the Bank Secrecy Act in November, but prosecutors sought a three-year sentence.
It is unclear what will happen to CZ, but, as has happened with previous court cases and allegations, the cryptocurrency industry has had to fight for both regulatory clarity and fraud in the sector. Investors were reminded of this today.
The momentum trade may be over
Even more worrying for cryptocurrency investors is the fact that the driving force behind the rally of the last six months has now faded. Investors have adopted a “risk-on” mindset since mid-2023 and are now facing an economic slowdown and the reality of higher interest rates for a longer period than previously expected.
Cryptocurrencies were supposed to be a hedge against some of these economic problems and offset the inflation caused by money printing. However, the reality is that cryptocurrency trades were correlated with high-risk assets such as growth stocks. And many growth stocks collapse if earnings miss expectations even slightly.
Unless there is a turnaround in the economy’s growth rate or investors’ appetite for risk, we may be seeing a high in cryptocurrency values for a while.
How cryptocurrencies can regain their appeal
What I look to grow in the next year is the utility that cryptocurrencies can bring to the financial market. Companies are starting to test or use cryptocurrencies and blockchain for applications like financial payments and bond issuance, which are only scratching the surface of potential use cases. But market value is still driven more by hype and speculation than real utility.
The story continues
I think tokens that add utility will be the best place for long-term investments, and that could mean that meme coins like Dogecoin and tokens like Bitcoin that are expensive to use to transfer funds will be left in the dust. Blockchain is coming, but not all tokens will have value when it does.
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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 Dogecoin Collapsed Today was originally published by The Motley Fool