Crypto Crash Shuts Down Bitcoin, Ethereum, and Dogecoin This Weekend Motley Idiot Canada

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What happened

The intense selling pressure we saw at the end of the trading week for stocks continued into the crypto market into the weekend. Three of the top 11 tokens by market cap, Bitcoin (CRYPT:BTC), ether (CRYPTO:ETH), and Dogecoins (KRYPTO:DOGE) showed negative 24-hour returns of 5.1%, 8.4%, and 9%, respectively, as of 5:30 p.m. ET.

Capital outflows have caused spot price declines for most major cryptocurrencies as investors adopt a risk-averse approach to all assets. This week’s upside in US Treasuries signaled that the bond market is pricing in a near-certain rate hike by the Fed in March. This prompted growth investors to sell anything remotely speculative, with the crypto sector being among the hardest-hit asset classes in the market.

Bitcoin logo superimposed over graph.

Image source: Getty Images.

These spot price declines were accelerated by forced liquidations centered on Bitcoin and Ethereum. Liquidations for the world’s two top cryptocurrencies totaled more than $471 million, or about 60% of all forced liquidations in the market. Dogecoin ranked 7th on the list with $12 million in liquidations in the last 24 hours.

Recent tweets from Elon Musk supporting Dogecoin weren’t enough to keep this meme token afloat this week. In bitcoin and ethereum, investors appear to be eyeing smaller competing blockchains amid a capital rotation that seems to have straight legs.

so what

Bitcoin and Ethereum benefit from the largest ecosystems of any blockchain network, and as such, capital flows matter to these top tokens. As capital rotates out of the crypto space, these tokens are currently being hit hard.

Meme tokens like Dogecoin are among the most sensitive to market sentiment and among the most volatile tokens in the crypto world. Dogecoin has had a wild ride in recent years, riding a speculative surge that many experts believe is being driven more by brilliant marketing than fundamentals. Accordingly, the potential downsides for many of these hard-to-value digital currencies could be significant, and traders note the short-term risks.

What now

These strong macro headwinds seem unrelenting at the moment, and valuations on these tokens are showing little respite. While Bitcoin, Ethereum, and Dogecoin each bounced off their daily lows, these tokens have each lost more than 45% of their value in just a few months.

This bear market is now referred to by many as the crypto winter. At the moment the market seems to be taking the view that this could be a pretty brutal storm. As traders and speculators hunker down, the question is whether long-term investors will eventually step in to pick up these tokens at a discount. After all, top tokens like bitcoin and ethereum have rallied in incredible ways from steep sell-offs in the past.

Right now, there aren’t huge differences between the performance of top-tier cryptocurrencies and meme tokens, so all bets are off. At some point, however, things should stabilize. When that will happen is anyone’s guess.

This article represents the opinion of the author, who may disagree with the “official” endorsement position of a Motley Fool premium advisory service. We are colourful! Challenging an investing thesis — including one of our own — helps us all think critically about investing and make decisions that help us be smarter, happier, and wealthier.


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