Why Bitcoin, Ethereum and Dogecoin are Falling Today

What happened

Several of the most important cryptocurrencies fell this morning, as investor sentiment remains negative and as the market prepares for a key inflation report later this week.

During the last 24 hours, from kl. 10:21 ET today, has shares in the world’s largest cryptocurrency, Bitcoin (BTC -2.29%), traded about 3% lower. At the same time, stocks in the world’s second largest cryptocurrency, Ethereum (ETH -1.98%)traded down about 2.7% and shares of the meme token Dogecoin (DOGE -5.00%) traded more than 5% lower.

So what

In a recent survey conducted by Bloomberg, 60% of the 950 investors who were asked where they think the price of Bitcoin is going said that they think it will reach $ 10,000 in the not too distant future, while 40% believe it going to go. higher from here. The current price of Bitcoin was about $ 20,500 at the time of writing.

Image Source: Getty Images.

“It’s very easy to be scared right now, not just in crypto, but in the world in general,” said Jared Madfes of venture capital firm Tribe Capital. Madfes also said that the feeling in the survey is representative of “people’s inherent fear in the market” right now.

The other thing investors may be thinking about this week is new data from the Consumer Price Index (CPI), which tracks a group of prices related to common daily consumer goods and services. The market tends to use this as a way of measuring inflation, which has been at some of the highest levels in four decades.

In May, the CPI rose by 8.6% on an annual basis, which was higher than economists had estimated and led the market to question whether inflation had peaked. The longer inflation persists, the more aggressive the Federal Reserve must be with interest rate hikes, which creates a greater likelihood that the economy will tip into a recession.

June data for the CPI will be released on Wednesday, and some economists believe we can see a larger year-over-year increase than the May data, which could have a negative effect on the market and cryptocurrencies.

“The headline is expected to be higher. It’s mostly because of energy,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group, according to CNBC.

Boockvar added: “The question is to what extent the moderation in commodity prices will be offset by ever-increasing service prices, mainly driven by rents.”

Many cryptocurrencies have traded more like technology stocks this year and have not fared well among the Fed’s aggressive rate hikes and balance sheet reductions. The price of Bitcoin is down more than 57% this year. Rising interest rates mean that more secure assets such as US Treasury bills provide more returns, which makes risky assets such as Bitcoin less attractive to investors.

What now

Although all cryptocurrencies are quite difficult to value, I continue to be optimistic about Bitcoin in the long run due to the continued use of the token around the world and in the regular financial system.

I also really like Ethereum, given how much the smart contract technology resonates and is used in different industries. I would stay away from the meme token Dogecoin because it does not offer anything special from a technical point of view or a real use case.