Why Bitcoin, Ethereum, and Dogecoin are all sinking again today

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What happened

Investors looking at the price action of the largest cryptocurrencies by market cap may not like what they see. As of 10 a.m.ET Monday, Bitcoin (CRYPTO: BTC) was down just over 1%, while Etheruem (CRYPTO: ETH) and Dogecoin (CRYPTO: DOGE) were down around 2%.

These downward movements are not massive. However, they are a continuation of relatively low price action for these cryptocurrencies. At their daily lows on Monday, each is down more than 3% and over the past seven days, each is down more than 9.5%.

As a direct result of its price drop over the past week, Dogecoin has slipped from the list of top 10 cryptocurrencies by market cap.

These declines appear to be linked to traders’ fears about tighter cryptocurrency regulation and how their token profits may be taxed under the provisions of the infrastructure law recently enacted by President Biden. There are rumors that another crypto winter could be underway as traders focus on these concerns and other headwinds, including the ongoing crackdown on cryptocurrency mining in China and the strengthening. of the US dollar.

That said, it’s not all bad news for large-cap cryptocurrencies. On Monday, El Salvador announced a “Bitcoin City” and sought to raise funds via a “Bitcoin bond” – two firsts for the crypto world. Additionally, the total value locked in on Ethereum’s Layer Two networks has just crossed an all-time high. Some investors are pointing to this news as signs of a pickup in adoption. (Total Locked Value refers to the amount of locked cryptocurrency in a given network.)

Image source: GETTY IMAGES.

So what

As we begin the week, there are certainly some bright spots that crypto bulls might get excited about. The adoption of various mega-cap cryptocurrencies continues to accelerate. The value created within Ethereum’s Layer Two networks is impressive. And the fact that El Salvador is the first country to take crypto seriously is another indication that these cryptocurrencies are becoming mainstream. Dogecoin remains one of the best tokens, despite its recent sale.

However, headwinds remain strong in the crypto world, and there are other macro-level concerns about inflation and the Federal Reserve’s speed reduction plans. As such, traders seem to take a cautious approach.

Now what

Investors know that volatility is the name of the game in the crypto space. Short-term momentum-induced rebounds and declines are commonplace. Therefore, the possibility that the current trend of low prices will continue for some time is real.

That said, there are encouraging catalysts to pulling out of Monday’s announcements on the Bitcoin and Ethereum fronts. They are the two largest cryptocurrencies by market cap, and as such, their performance can pull industry valuations higher or lower with them.

In the short term, it can be difficult to assess which direction the winds are blowing. However, a few catalysts materialized on Monday that could support a longer-term bullish thesis, prompting some crypto investors to buy that decline.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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