Ethereum
Why Bitcoin, Ethereum and Dogecoin crashed today
These three megacap tokens are losing a lot of ground today on macro and token-specific news.
It’s been a pretty hectic day in the world of cryptocurrencies. The entire crypto market is down 3.9% over the past 24 hours, as of 3 p.m. ET, with Bitcoin (BTC -1.26%), Ethereum (ETH -2.22%), and Dogecoin (DOGE -4.40%) paving the way for the decline. These top three tokens declined by 4.5%, 5.1%, and 7% during the same period, outpacing the losses of the entire market.
In the crypto world, these are three of the most closely watched cryptos, due to their importance to a wide range of investors. As the world’s largest and second largest digital assets, Bitcoin and Ethereum are considered the industry benchmarks. Most of the value accumulated in this space comes from these two tokens, which currently represent well over half of the value of the entire sector. For investors in Dogecoin, there are many lessons that can be learned from the price movements of this meme token when it comes to sentiment in this sector, especially among speculators.
Let’s take a look at what’s driving this price action today.
This year was supposed to be the venture rally, right?
Much of the current development regarding Bitcoin and Ethereum, considered stores of value, appears to be linked to concerns over bets on rate cuts and the effect on the US dollar (which has remained very strong during last month). As the dollar strengthens amid bets that interest rate cuts could be less (or further) than expected, this will have some impact on the valuations of these major cryptocurrencies that are compared to the dollar , like other raw materials.
Additionally, some concerns about cooling demand for Bitcoin ETFs locally have sent Bitcoin (and the overall market) lower today. The latest data as of April 1 shows net daily outflows from these exchange-traded products of around $1.1 billion, calling into question the overall thesis that strong demand and an upcoming Bitcoin halving could drive to price outperformance. This could also hurt demand for Ethereum ahead of the potential launch of spot ETFs for this token, as well as overall institutional capital flows into this digital asset.
The decline of Dogecoin today should really be put into perspective, since this token has experienced new success. two-year high this week. There is still a lot of hype around the world’s largest meme token regarding an upcoming meme token spin-off and the upcoming launch of futures contracts on Coinbase. But as is the case with most daily movements, Dogecoin’s outsized fall is linked to its nature as a more speculative asset that traders use to bet on broader price movements.
The party is over ?
This crypto rally has been relatively orderly, so investors may want to consider the current decline of these three major tokens from a broader perspective. Yes, a 5-7% daily decline in an asset is a big step forward. But in a broader context, these higher risk volatile assets tend to move this way on a frequent basis. As a result, I’m not sure much can be said about the current decline, a sign of the end of the strong recovery we’ve seen this year. At least not yet.
For now, investors will definitely want to pay attention to incoming macroeconomic data and one-time ETF inflows as an indicator of continued changes in demand for digital assets. I’m not surprised to see a slight decline in ETF inflows in recent days, given the rise we’ve seen so far this year. However, it will be important to see whether investors return to this asset class, or whether a broader rotation is underway.
Chris MacDonald has positions in Ethereum. The Motley Fool holds positions and recommends Bitcoin, Coinbase Global, and Ethereum. The Mad Motley has a disclosure policy.