Why did Bitcoin, Ethereum, and Dogecoin drop? According to CoinMarketCap, as of 3:15 p.m. ET today. The two most important cryptocurrencies, Bitcoin (CRYPTO:BTC) and Ethereum (CRYPTO:ETH). Have each lost 4.1 percent and 4.7 percent, respectively, during the previous 24 hours. Over the same time period, Dogecoin (CRYPTO:DOGE). A popular meme token, kept pace with the other top tokens. Shedding 4.6 percent of its value.
These three biggest cryptocurrencies have essentially set the tone. For the whole cryptocurrency market, which has plummeted. Along with the rest of the risk assets in the early hours of today morning. The release of the minutes from the current Federal Reserve meeting. Has led to the conclusion that the unduly accommodative monetary policy. That has prevailed thus far is likely to come to an end sooner than expected. As analysts and investors have noted in their analyses. On the Federal Reserve’s agenda, concerns about inflation. As well as a major drop in the Federal Reserve’s bond holdings, continue to be prominent.
It’s fascinating to watch the correlation between stocks, bonds, and other risk assets. As well as cryptocurrencies, play out once more today. Increased bond yields, pushed by inflation fears, and lower stock market values. It is possible to draw a direct association between the two variables in question. However, for cryptocurrencies such as Bitcoin, which are frequently. Referred to as “digital gold,” it is possible to argue that this news is bullish.
Having said that, it is undeniable that risk assets have been trading. With greater correlation in recent months. A combination of easy money policies and low borrowing rates. Has resulted in a significant increase in capital inflows. Into the most risky of assets in 2021. This year, if capital flows continue to weaken, it is highly feasible that the upward momentum. We experienced in 2021 may reverse to the downside.
Because of this, investors appear to be assuming an unduly negative attitude. Toward cryptocurrencies, with profit-taking extending into the New Year. Those who made huge profits through meme currencies. Like as Dogecoin, or who benefited from the expansion of blockchain networks. Such as Ethereum, look eager to cash in on their gains at these prices.
Numerous investors are doubtful about the capacity of cryptocurrencies. To provide any form of portfolio protection against inflation. Or a more hawkish tone from the Federal Reserve at this juncture in the market’s development. The answer, according to the existing condition of circumstances, is a loud “no.” It is possible, on the other hand, that this will be changed.
According to the Investment Company Institute’s research. Cryptocurrency has been one of the best-performing asset classes in recent years. Boosting the portfolio returns of investors who have included.
Even a sliver of exposure to these digital tokens in their investment portfolios. “Cryptocurrency has been one of the best-performing asset classes. In recent years,” says the Investment Company Institute.
In spite of this, it appears that investors are making preparations. For a day when volatility will be lower than it is currently. Therefore, it appears as though this momentum-driven gain has the potential. To maintain its pace for the foreseeable future.
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