Volatility continues to be the name of the game in cryptocurrencies, and today is no exception. But unlike most of 2024, today's market is unfavorable for investors.
As of 1:45 p.m. ET, the values are: Bitcoin (BTC -2.55%) Although it fell by 2.8%, Ethereum (Ethereum -4.88%) It has fallen by 5.2%. Bonk (Bon -10.94%) It fell 9.4%. The move was influenced by long holidays in some parts of the world, but 24/7 crypto trading kept market speculation moving.
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inflation will return
The biggest data point impacting the market today is the ISM Factory Index, which improved by 2.5% to 50.3% in March. A reading of 50% or higher indicates that manufacturing managers believe that the manufacturing market is expanding. This follows an expected 16 consecutive months of declines.
Investors are taking the numbers as a sign that the economy is doing well despite rising interest rates over the past few years. If inflation is under control and the Fed doesn't need to cut rates to support the economy, it might not cut rates at all.
Bond traders are currently pricing in less than 50% odds of a June 2024 rate cut, which would be the biggest shock this year. Investors are expecting as many as six rate cuts and could get through two quarters without one.
Cryptocurrency decline today
There is a correlation between technology, high-growth stocks and cryptocurrencies, and part of the rally over the past six months has been on hopes of lower interest rates. When this theory is broken, it is not uncommon for cryptocurrencies to fall.
Bitcoin exchange-traded funds (ETFs) were another catalyst, bringing billions of dollars into the industry. However, last week we started seeing outflows, but the inflows started to pick up again later in the week.
Ethereum is also receiving a boost from expectations that an ETF will be approved in the coming months. However, this is not certain in the current regulatory environment.
If the ETF does not become a catalyst because it is not approved, the value of the cryptocurrency may fall.
Mr. Bonk's moves are just a reflection of other moves, with added volatility. This is becoming increasingly popular as an alternative to meme coins. dogecoinHowever, its main value is speculation rather than blockchain currencies like Bitcoin or Ethereum.
Where will cryptocurrencies go from here?
I think the big trigger for 2024 has already passed. Bitcoin ETFs have helped increase awareness and investment in cryptocurrencies, which has raised the bar for the entire industry. Also, speculation based on the economic environment and the possibility of a rate cut appears to have been overdone.
Fundamentals then drive the crypto market, and that's not a great place to be. Bitcoin may have value as “digital gold,” but I think it's more of a speculative asset. Ethereum's promise has always been to provide real-world use cases in finance and digital assets, but it is very slow and very expensive, which is why other blockchains are gaining popularity.
Bonk meme pop was great, but meme coins never seem to last. And without a catalyst, all three cryptocurrencies could fall in the coming months as investors seek more fundamental value in the market.
Travis Hoium has a position in Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
