Why Top Cryptocurrencies Bitcoin, Ethereum, and Dogecoin Are Slumping Today

What happened

Today’s crypto sell-off has stymied much of the positive sentiment we’ve seen materialize in this sector in recent weeks. As of 12:30 p.m. ET, top cryptocurrencies Bitcoin (BTC -3.81%), Ethereum (ETH -8.54%), and Dogecoin (DOGE -5.73%) sunk 5.1%, 9.7%, and 6.8%, respectively, over the past 24 hours.

This sharp sentiment shift appears to be related to the dissipation of hype around Ethereum’s upcoming merge, which drove a significant portion of this sector’s gains in recent weeks. 

This move in the crypto market has been mirrored by equity markets, which are also down substantially today as investors await the Federal Reserve decision on interest rate policy moving forward. This week, the Federal Open Market Committee is expected to announce a rate hike of 75 basis points (0.75%), in a move that will bring the overnight federal funds rate above 2% for the first time since the pre-pandemic era.

So what

Ethereum has been among the more volatile large-cap tokens in the market in recent weeks. Accordingly, its outsize decline today ought to be put into context.

After all, this is a token that’s run up significantly of late, on anticipation of the network’s upcoming merge. Thus, on down days like today, seeing higher selling interest materialize as investors take profits and realize short-term gains makes sense. 

Broader macro concerns appear to warrant a cautious approach by growth investors, as risk assets get revalued. Some analysts have pointed to the potential for a more sustained bear market in stocks as a pretense for investors steering clear of higher-risk asset classes such as cryptocurrencies. Whether such a prolonged bear market is in store or not is still a topic of discussion among investors, leading to outsize volatility as price discovery unfolds.

Now what

The overall crypto market continues to hover just a hair above the psychologically important $1 trillion market cap level. Accordingly, there is some concern brewing among crypto investors that traders could be enticed to hit the sell button if we fall back into 12-digit territory. In the weeks to come, more volatility could become the norm, as investors push and pull at this seemingly critical level.

Additionally, it will be interesting to see how the crypto market reacts to the upcoming Fed decision this week. Whether this rate hike is met with relief, or pessimism, is something many will be interested to see. 

Until this decision, I expect more choppiness on the horizon. For long-term investors in these top cryptocurrencies, the next few days and weeks appear to be shaping up to be exciting (for lack of a better word).