Bitcoin
Why Bitcoin, Ethereum and Dogecoin plummeted today
The enthusiasm around crypto appears to be fading.
O crypto market It has had momentum all year, but appears to be coming to an end as April comes to a close. The entire market is down, but the biggest names are in the lead.
Bitcoin (Bitcoin -4.50%) is down 4.7% since the stock market close on Monday, Ethereum (ETH -1.37%) fell 6.5%, and Dogecoin (DOGE -3.34%) fell 6.1%. And this continues a bad week, with tokens falling 9.7%, 8.1% and 18.2% in the last seven days.
Crypto ETFs have reached saturation
When Bitcoin exchange-traded funds (ETFs) hit the market in the US, they brought billions of dollars in new investment to the industry, and Bitcoin jumped and pulled the entire market with it. But that didn’t happen in Hong Kong.
Bitcoin and Ethereum ETFs were introduced in Hong Kong yesterday, and there were only $8.5 million in Bitcoin ETF trades and $2.5 billion in Ethereum ETF trades on the opening day. This could indicate that the appetite for crypto ETFs is waning.
The fate of the founder of Binance
The other cloud hanging over crypto is the sentencing of Binance founder Changpeng “CZ” Zhao in Seattle. He pleaded guilty to one count of violating the Bank Secrecy Act in November, but prosecutors asked for a three-year sentence.
It’s unclear what will happen to CZ, but as with previous lawsuits and accusations, the crypto industry has had to fight for both regulatory clarity and fraud in the industry. Investors were reminded of that today.
Momentum trading may be over
More worrying for crypto investors is that the driver of the rally over the past six months has now disappeared. Investors have had a “risk on” mentality since mid-2023 and are now facing a slowing economy and the reality of higher interest rates for longer than previously expected.
Cryptography was supposed to be a hedge against some of these economic problems and offset inflation caused by money printing. Still, the reality is that cryptocurrency trading is correlated with riskier assets like growth stocks. And many growth stocks are falling if earnings miss expectations, even by a small amount.
Unless there is a turnaround in the economy’s growth rate or investors’ risk appetite, we may have seen a rise in crypto values for a while.
How Crypto Can Get Its Mood Back
What I am looking to grow in the next year is the usefulness that cryptography can bring to the financial market. Companies are beginning to test or use cryptography and blockchain for applications such as financial payments and securities issuance, which are just scratching the surface of potential use cases. But market value is still driven more by hype and speculation than actual utility.
I think tokens that add utility will be the best place for long-term investments, and this could mean that meme coins like Dogecoin and tokens like Bitcoin that are expensive to use to transfer funds will be left behind. Blockchain is coming, but not all tokens will have value when it happens.
Travis Hoium has positions in Ethereum. The Motley Fool has positions and recommends Bitcoin and Ethereum. The motley fool has a disclosure policy.