It’s been a rather choppy day in the cryptocurrency world. The entire crypto market is down 3.9% over the past 24 hours, as of 3 p.m. ET, with Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and Dogecoin (CRYPTO: DOGE) leading the way lower. These three major tokens have declined 4.5%, 5.1%, and 7% over the same time frame, outpacing the losses of the overall market.
In the crypto world, these are three of the mostly 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 viewed as the benchmarks for the sector. Most of the value being accrued to this space goes to these two tokens, which currently account for well more than half the value of the overall sector. For investors in Dogecoin, plenty can be gleaned from this meme token’s price movements with respect to sentiment in this sector, particularly among speculators.
Let’s dive into what’s driving this price action today.
This year was supposed to the risk-on rally, was it not?
Much of today’s move with respect to Bitcoin and Ethereum, seen as stores of value, appears to be tied to concerns around rate cut bets, and the effect on the U.S. dollar (which has remained very strong over the past month). As the dollar strengthens amid bets that interest rate cuts may be fewer (or farther away) than anticipated, that’s going to have some impact on the valuations of these top cryptocurrencies that are benchmarked against the dollar, similar to other commodities.
Additionally, some concerns around cooling spot Bitcoin ETF demand has sent Bitcoin (and the entire market) lower today. The latest data as of April 1 shows net daily outflows from these exchange-traded products of around $1.1 billion, hurting the overall thesis that strong demand and an upcoming halving event for Bitcoin could lead to price outperformance. This could also hurt demand for Ethereum ahead of potential spot ETFs launched for this token, as well as overall institutional capital flows into this digital asset.
Dogecoin’s decline today really needs to be put into perspective, since this token hit a fresh two-year high this week. There’s still plenty of hype around the world’s largest meme token relating to an upcoming meme token spinoff and an upcoming launch of futures contracts on Coinbase. But as is the case with most daily moves, Dogecoin’s outsize plunge relates to its nature as a more speculative asset traders use to bet on broader price moves.
Is the party over?
This crypto rally has been relatively orderly, so investors may want to consider today’s decline in these three top tokens from a broader lens. Yes, a 5% to 7% daily decline in any asset is a big move. But in the larger scheme of things, these higher-risk volatile assets tend to move in such fashion on a frequent basis. Accordingly, I’m not entirely sure much can be made about today’s decline signaling an end to the strong rally we’ve seen this year. At least, not yet.
For now, investors will certainly want to pay attention to incoming macro data and spot ETF inflows as a gauge of how demand for digital assets continues to evolve. I’m not surprised to see a downtick in ETF inflows in recent days, given the run-up we’ve seen thus far this year. However, it will be important to see if investors return to this asset class, or if a broader rotation is underway.
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Chris MacDonald has positions in Ethereum. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, and Ethereum. The Motley Fool has a disclosure policy.
Why Bitcoin, Ethereum, and Dogecoin Slumped Today was originally published by The Motley Fool