Why Bitcoin, Shiba Inu and Dogecoin are falling today

Three of the most important cryptocurrencies investors are paying attention to are seeing a lot of red on their screens today. As of 2:15 p.m. ET, Bitcoin (BTC -3.05%), Shiba Inu (SHIB -7.72%)and dogecoin (Doge -6.93%) They fell by 3.7%, 8.1%, and 7.5%, respectively, in the past 24 hours, sending the cryptocurrency market lower.

While these moves are certainly significant, they represent a relatively small dent in each of these tokens' monthly and year-to-date gains. Bitcoin is still up over 7% in the last month and over 130% over the past year, while Shiba Inu and Dogecoin are up 28% and 15%, and 139% and 88%, respectively, monthly and yearly. .

Now, the question many investors have is, is this short-term movement a temporary trend of profit-taking and short-term consolidation, or are there further structural factors that could impact these tokens? Is there a problem? Let's take a closer look at what's behind today's moves in these top tokens.

Is it structural profit taking or short term profit taking?

One of the key market-related trends that appears to be driving the short-term decline in most risk assets (including stocks) is today's Federal Reserve Chairman Jerome Powell's “This is like a committee.'' It's not a thing.'' Urgent rate cuts…If the economy performs as expected, there will be further rate cuts this year, bringing the total to 50 rate cuts. [basis points] more. ”

The rapid decline in interest rates was one of the main factors behind betting on stable gold-like assets such as Bitcoin. The idea is that as interest rates fall and the US dollar depreciates, assets like Bitcoin, which can be considered commodity-like in nature, should gain bids. Moreover, a faster rate cut could signal that recessionary momentum is ahead, and many in the healthy money community continue to argue that we should be bullish on Bitcoin and related tokens.

Movements in Bitcoin and many risk assets are reducing demand for top meme tokens such as Shiba Inu and Dogecoin. Today's liquidation data shows that both Shiba Inu and Dogecoin have experienced numerous long-term liquidations (explosion of bullish investors' positions), with Shiba Inu recording its largest liquidation since early June. are. Combined, over $5 million of bullish bets on these tokens were liquidated, forcing investor funds out of these tokens and initiating a forced sale.

So while many of the factors influencing these three top cryptocurrencies appear to be short-term in nature, we don't see anything unusual in their movements today. Bitcoin's breakdown in larger macro factors naturally affected derivatives investors who lost money on long-term bets on meme tokens. It's a story that repeats over and over again in this space.

So, is it all a play on interest rates?

The overall market now appears to be paying more attention to monetary policy, which has probably been the case for the past few years. While interest rates have a significant impact on the valuation of risky assets, the volatile nature of these three cryptocurrencies provides significant upside potential if the market views monetary policy actions positively . The reverse is also true.

Investors now seem spooked by the idea that the Fed may not be as aggressive in its rate-cutting cycles as it has been in its rate-hiking cycles. And with various tokens typically posting outsized gains in the final quarter of the year, speculative funds could easily slide into these assets if these headwinds actually prove to be temporary. My opinion is that there is a possibility of backflow.