Why top cryptocurrencies Bitcoin, Ethereum, and Dogecoin are slumping today

It's not just stocks that are selling off in a big way today.

| More on:
A woman sits with her hands covering her eyes while lifting her spectacles sitting at a computer on a desk in an office setting.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Today's crypto sell-off has stymied much of the positive sentiment we've seen materialize in this sector in recent weeks. As of 12:30 p.m. ET, top cryptocurrencies Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and Dogecoin (CRYPTO: DOGE) sunk 5.1%, 9.7%, and 6.8%, respectively, over the past 24 hours.

This sharp sentiment shift appears to be related to the dissipation of hype around Ethereum's upcoming merge, which drove a significant portion of this sector's gains in recent weeks. 

This move in the crypto market has been mirrored by equity markets, which are also down substantially today as investors await the Federal Reserve decision on interest rate policy moving forward. This week, the Federal Open Market Committee is expected to announce a rate hike of 75 basis points (0.75%), in a move that will bring the overnight federal funds rate above 2% for the first time since the pre-pandemic era.

Bitcoin liquidations have surged on this news, with trading volumes remaining very elevated. 

So what

Ethereum has been among the more volatile large-cap tokens in the market in recent weeks. Accordingly, its outsize decline today ought to be put into context. 

After all, this is a token that's run up significantly of late, on anticipation of the network's upcoming merge. Thus, on down days like today, seeing higher selling interest materialize as investors take profits and realize short-term gains makes sense. 

Broader macro concerns appear to warrant a cautious approach by growth investors, as risk assets get revalued. Some analysts have pointed to the potential for a more sustained bear market in stocks as a pretense for investors steering clear of higher-risk asset classes such as cryptocurrencies. Whether such a prolonged bear market is in store or not is still a topic of discussion among investors, leading to outsize volatility as price discovery unfolds. 

Now what

The overall crypto market continues to hover just a hair above the psychologically important $1 trillion market cap level. Accordingly, there is some concern brewing among crypto investors that traders could be enticed to hit the sell button if we fall back into 12-digit territory. In the weeks to come, more volatility could become the norm, as investors push and pull at this seemingly critical level.

Additionally, it will be interesting to see how the crypto market reacts to the upcoming Fed decision this week. Whether this rate hike is met with relief, or pessimism, is something many will be interested to see. 

Until this decision, I expect more choppiness on the horizon. For long-term investors in these top cryptocurrencies, the next few days and weeks appear to be shaping up to be exciting (for lack of a better word). 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Chris MacDonald has positions in Ethereum. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin and Ethereum. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. 

 

More on International Stock News

A man sits nervously at his computer with his mouth resting against his hands clasped in front of him as he stares at the screen of his computer on a home desk.
Share Market News

It's official: US stock market enters correction

The S&P 500 is now down 10.13% from its most recent peak.

Read more »

A stock market chart on a red background with an arrow going down, indicating a falling share price.
International Stock News

Nasdaq stock market correction: Is Nvidia a screaming buy right now?

Stocks are going on sale. Is it time to buy?

Read more »

A corporate team or board stands together and looks out the window.
International Stock News

Nasdaq Correction: I'd consider buying the dip on all "Magnificent Seven" stocks — Except this one

The index is down around 9% year to date and 13% from its December peak.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
International Stock News

Prediction: Nvidia will soar over the next 5 years. Here's 1 reason why.

Nvidia has many irons in the fire that could all meaningfully contribute over the next five years.

Read more »

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
International Stock News

Will Nvidia stock keep dropping in 2025?

Let's dig deeper to determine what the next nine months might have in store for the industry's leader.

Read more »

Woman looking at a phone with stock market bars in the background.
International Stock News

President Trump's trade war is here: Here's how investors can benefit

Tariff concerns have already unwound the S&P 500's post-election gains.

Read more »

AI written in blue on a digital chip.
International Stock News

Nasdaq correction: Time to buy the dip on Nvidia?

Let's take a look.

Read more »

Woman looks amazed and shocked as she looks at her laptop.
International Stock News

If you'd invested $10,000 in Amazon stock 25 years ago, here's how much you'd have today

How rewarding has the stock been?

Read more »