Ethereum
Why Bitcoin, Ethereum and Dogecoin plunged today
The hype around crypto seems to be fading.
THE crypto market has had momentum all year, but that seems to be coming to an end at the end of April. The overall market is down, but the biggest names are leading the way.
Bitcoin (BTC -5.98%) has fallen 4.7% since the stock market closed on Monday, Ethereum (ETH -7.34%) is down 6.5%, and Dogecoin (DOGE -8.42%) is down 6.1%. And it continues a bad week with the tokens down 9.7%, 8.1%, and 18.2% over the past seven days.
Crypto ETFs have reached saturation
When Bitcoin exchange-traded funds (ETFs) hit the U.S. market, they brought billions of dollars of new investment to the industry, and Bitcoin surged and took 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 trading and $2.5 billion in Ethereum ETF trading on the day. ‘opening. This could indicate that the appetite for crypto ETFs is fading.
The fate of the founder of Binance
The other cloud hanging over crypto is the conviction of Binance founder Changpeng “CZ” Zhao in Seattle. He pleaded guilty to one count of violating the Bank Secrecy Act in November, but prosecutors sought a three-year sentence.
It’s unclear what will happen to CZ, but like what happened with previous court cases and accusations, the crypto industry has had to fight for both regulatory clarity and against fraud in the area. Investors were reminded of this today.
Momentum trading may be over
What is more worrying for crypto investors is that the driving force behind the rally of the past six months has now faded. Investors have been risk-oriented since mid-2023 and now face a slowing economy and the reality of higher-than-expected interest rates.
Crypto was supposed to provide a hedge against some of these economic woes and offset the inflation caused by money printing. Yet the reality is that crypto trading is correlated with higher risk assets like growth stocks. And many growth stocks fall if earnings beat expectations even by a little bit.
Barring a turnaround in the economy’s growth rate or investors’ appetite for risk, we may have seen a high in crypto stocks for some time.
How crypto can regain its momentum
Where I am looking for growth over the next year is the utility that crypto can bring to the financial market. Companies are beginning to test or use crypto and blockchain for applications such as financial payments and bond issuance, which are only scratching the surface of potential use cases. But market value remains determined more by hype and speculation than actual utility.
I think tokens that add utility will be the best place for long-term investments, and that may mean that meme coins like Dogecoin and tokens like Bitcoin that are expensive to use to transfer funds will be left in the dust. Blockchain is coming, but not all tokens will have value at that time.
Travis Hoium has positions in Ethereum. The Motley Fool posts and recommends Bitcoin and Ethereum. The Mad Motley has a disclosure policy.