What happened
Cryptocurrencies continued to struggle today as the market continues to navigate a worrying macroeconomic outlook that is causing a sell-off in riskier assets.
During the last 24 hours, the price of the world’s largest cryptocurrency, Bitcoin (BTC -12.48%), was trading virtually flat at 10:56 am ET today. However, Bitcoin briefly dipped below $30,000 today for the second time this week and is down more than 12% in the last five days.
The price of doecoin (DOGE -28.37%) had fallen about 16% over the last day at the same time, and the price of Shiba Inu (SHIB -33.77%) it had fallen by about 17.5%.
So what
Cryptocurrencies have not fared much better than tech stocks in recent months, as the Federal Reserve first tightened and then raised its benchmark overnight lending rate, the fed funds rate. It has increased that rate by about 0.75% in its last two meetings, even with a half-point increase in its meeting earlier this month. When the Fed raises rates, it makes safer assets like US Treasury bills, which are guaranteed by the US government, yield more. That causes investors to demand higher returns from other riskier assets, which can put pressure on them.
Image source: Getty Images.
“This further supports the case that bitcoin investors were looking to de-risk, sell, or add collateral on margin in response to market volatility,” analysts at blockchain firm Glassnode wrote in a report earlier this week. .
In addition, inflation has remained high. New data from the Bureau of Labor Statistics showed that the Consumer Price Index, which tracks the prices of common, everyday goods and services, rose 8.3% year over year in April. That is slightly lower than the rise in the CPI in March, but more than the 8.1% rise that pundits and analysts had been forecasting.
“We’re starting to see energy [costs] back off a little bit, but it’s not enough,” said Kathy Jones, chief fixed income strategist at charles schwab, according to CNBC. “Markets were expecting a better number and it’s not good enough to rule out further Fed tightening.”
Bitcoin has long been viewed by many as a good hedge against inflation due to its finite supply of 21 million tokens. But so far there has been no real proof of that, as the price of Bitcoin is down more than 50% in the last six months.
Now what
I don’t see much news on the Dogecoin and Shiba Inu meme tokens, but I think they are struggling along with the broader altcoin market.
While they definitely trade with some correlation to Bitcoin, altcoins like this are arguably even riskier because they are not driven by any kind of fundamentals in the first place, but rather by their ability to build a community and the enthusiasm of users. investors around you.
Also, there is probably no chance that Dogecoin or Shiba Inu will be able to cover inflation due to their huge supplies. Dogecoin has no supply limit, while Shiba Inu’s is 1 billion tokens, although there are currently 549 billion tokens in circulation.
Ultimately, I am quite bearish on Dogecoin and Shiba Inu, but I still believe in Bitcoin as a long-term buy and hold. Every day, more of the traditional financial system seems to be adopting Bitcoin and using blockchain technology.
I also think there is potential for cryptocurrencies to gain more consumer adoption for everyday transactions and payments, which would probably be good for crypto prices as well.
Reference-www.fool.com