Volatility remains the name of the game in cryptocurrency and today is no different. But unlike most of 2024, the market today is working against investors.
At 1:45 pm ET, the value of bitcoin (CRYPT: BTC) has fallen 2.8%, Ethereum (CRYPT: ETH) has fallen by 5.2%, and bonk (CRYPT: BONK) has fallen 9.4%. The move was affected by a long holiday weekend in some parts of the world, but 24/7 cryptocurrency trading kept market speculation moving.
Inflation strikes again
The biggest data impacting the market today is the ISM industrial index, which improved 2.5% in March to 50.3%. A reading above 50% indicates that manufacturing managers believe the manufacturing market is expanding. This followed 16 consecutive months of expected declines.
Investors take this reading as a sign that the economy is doing well, despite higher interest rates in recent years. If inflation is under control and the Fed doesn't need to cut rates to help the economy, it may not cut rates at all.
Bond traders are now pricing the odds of a June 2024 rate cut at less than 50%, which would have been a shock to start the year. Investors were expecting up to six rate cuts, and two quarters may go by without any.
The decline of cryptocurrencies today
There is a correlation between technology and high-growth stocks and cryptocurrencies, and part of the bullish movement of the last six months has been an anticipation of lower interest rates. As that thesis falls apart, it is not unusual to see cryptocurrencies fall.
Bitcoin exchange-traded funds (ETFs) were another catalyst and brought billions of dollars to the industry. But last week they began to see money outflows, although they turned into inflows again at the end of the week.
Ethereum has also received a boost from speculation that it will gain ETF approval in the coming months. But that's not certain in the current regulatory environment.
If ETFs are not a catalyst because they are not approved more, cryptocurrency values โโmay fall.
Bonk's move is just a mirror of the others, with some extra volatility added. This is a meme coin that has become a popular alternative to Dogecoinbut its main value is speculation rather than being a blockchain currency like Bitcoin or Ethereum.
Where do cryptocurrencies go from here?
I think the main catalysts for 2024 are already behind us. Bitcoin ETFs have helped increase awareness and investment in cryptocurrencies and that has boosted the entire industry. And speculation based on the economic environment and a possible rate cut appears to have been overblown.
That leaves fundamentals driving the cryptocurrency market and that's not a good place to be. Bitcoin may have value as "digital gold", but I think it is more of a speculative asset than anything else. The promise of Ethereum was always that it would provide real-world use cases in finance and digital assets, but it is just as slow and much more expensive than other blockchains are gaining popularity.
Bonk's meme pop has been nice, but meme coins never seem to last. And without a catalyst, you could see all three cryptocurrencies falling in the coming months as investors look for more fundamental value in the market.
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Travis Hoium has positions in Ethereum. The Motley Fool holds and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
Why Bitcoin, Ethereum and Bonk Crashed Today was originally published by The Motley Fool
