Why Bitcoin, Ethereum and Dogecoin are losing steam today
What happened
The cryptocurrency market is once again seeing red, continuing a rather bearish trend seen in recent days. As of 12:30 p.m. ET, Bitcoin (CRYPTO:BTC), Ethereum (CRYPTO:ETH), and Dogecoin (CRYPTO:DOGE), three of the largest cryptocurrencies by market cap, saw their prices fall by 1.6%, 1.2%, and 2.6%, respectively, over the past 24 hours.
Macro forces appear to be behind at least some of this move, with concerns about the upcoming debt ceiling and an ongoing banking crisis hurting investor confidence in risk assets. Today’s outsized decline in Dogecoin seems to depict such a sentiment, with other meme tokens falling faster than the overall market.
Bitcoin’s decline appears to be linked to rising transaction fees on the Bitcoin network, which remain high in today’s session. High levels of congestion are usually a bullish indicator, but the fact that a transaction stops from Binance appears to be the driver of this higher transaction price has some investors worried.
Ethereum co-founder Charles Hoskinson’s recent comments surrounding a potential looming “economic and financial catastrophe” have not boded well for Ethereum, which continues to sell off as investors ponder what level of activity will be seen going forward if the economy grinds to a halt.
So what
It has been incredible to see the rise in Bitcoin, Ethereum and Dogecoin to start the year. What appeared to be a bull market rally with upside potential (assuming a break-and-pivot scenario plays out) has once again given way to concerns that economic conditions may remain tighter, and ongoing macro concerns may bleed into the crypto sector.
In many respects, Bitcoin and Ethereum are often seen as assets with a lower correlation to the stock market (although that has been tested in recent years, given these assets’ relatively high correlation to higher-beta stocks), meaning there may be some hedging benefits to hold digital assets right now. That said, investors appear to be rotating into gold, commodities, and other safe-haven assets to a greater extent, suggesting that cryptocurrencies may not be immune to similar downside pressures as other asset classes right now.
What now
It is unclear to what extent these top digital assets provide portfolio protection against what may indeed be a looming catastrophe. With US Treasuries now yielding 5%, investors of all types have an alternative to consider. This could affect investor demand for more speculative assets, despite fairly strong price developments so far this year.
