Why Ethereum, Dogecoin, and The Sandbox dropped today

Investors were discounting just about everything.

| More on:
Cryptocurrency chart with different cryptocurrencies written.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened 

As investors sell off stocks broadly, the "risk-off" trade has made its way to cryptocurrencies. The market has been down sharply since just before the trading opened Thursday, and that's when a sudden crash hit crypto. 

As of 3:30 p.m. ET, the value of Dogecoin (CRYPTO: DOGE) had fallen 5.4% over the prior 24 hours, Ethereum (CRYPTO: ETH) was down 7.8%, and The Sandbox (CRYPTO: SAND) was down 11.8%. Ironically, early Thursday morning, values were up by nearly 10% from their Wednesday lows. 

So what 

Amid the backdrop of a falling crypto market, the news related to the industry is fairly positive. Congress is considering allowing companies to include cryptocurrencies in their 401(k) plans, which could bring a new swath of investors to the assets. California also announced that it will also look into regulations to adopt digital assets -- not fight against them -- as an executive order from President Joe Biden indicated recently.

Gucci also announced that it will begin accepting certain cryptocurrencies in its stores as early as this month, Bitcoin, Ethereum, and Dogecoin among them.

Despite those positive news items, the falling stock market is pulling cryptocurrency values down with it. In addition, the volatility of tokens means the stock market's losses are generally magnified in crypto, at least in the short term. 

Now what 

The volatility we are seeing Thursday is par for the course in cryptocurrencies. Investors need to expect that valuations will swing wildly, even if news seems to be moving in their favor. What's really changed in the last six months is that crypto values have become much more correlated with the stock market overall. 

Taking a step back, I do see some positive news for the crypto industry. Retailers accepting cryptocurrencies is a positive step toward broader adoption, and a flood of developers are moving into the space as well. That's great for the development of the crypto economy, but it'll take time for developers to build new projects and for user adoption to grow. 

I'm bullish on the development in the crypto space, as well as what appear to be favorable trends in the regulatory environment, at least in the U.S. These should be tailwinds for the crypto market overall. But it will be a while before those things have any direct impact, and clearly, traders' time horizons are getting shorter by the day. 

Big market sell-offs can be great buying opportunities for long-term investors, though it can be difficult to take advantage of them. I plan to buy crypto assets in the coming months in anticipation of their growth over the next decade, but that doesn't mean I think values will recover quickly. It may take months or even years for even the best cryptocurrencies to get back to their previous highs. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Travis Hoium has positions in Ethereum. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Ethereum. The Motley Fool Australia owns and has recommended Ethereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. 

More on International Stock News

Happy woman on her phone while her electric vehicle charges.
International Stock News

Is Tesla the best EV stock for you?

Tesla stands out as the premier EV maker, but it might not be right for every investor.

Read more »

A woman sits on sofa pondering a question.
International Stock News

After Nvidia's 10-for-1 stock split, is it still a buy?

Nvidia shares saw a bump after their recent split.

Read more »

Investor looking at falling ASX share price on computer screen
International Stock News

Nvidia stock drops 6.5%, dragging artificial intelligence stocks lower

Is the AI bubble bursting?

Read more »

A cool young man walking in a laneway holding a takeaway coffee in one hand and his phone in the other reacts with surprise as he reads the latest news on his mobile phone
International Stock News

Thinking about buying Nvidia stock? Here's why you might already own it

You might not have missed out on Nvidia's gains after all.

Read more »

Man smiling at a laptop because of a rising share price.
International Stock News

Nvidia investors just got some bullish news

The GPU leader has opportunities for robust growth beyond the artificial intelligence market.

Read more »

A beautiful ocean vista is shown with a woman whose back is to the camera holding her arms up in triumph as she stands at the top of a rock feeling thrilled that ASX 200 shares are reaching multi-year high prices today
International Stock News

Is Nvidia stock going to $200 in the wake of its 10-for-1 stock split?

Wall Street analysts are boosting their price targets in the wake of Nvidia's high-profile stock split.

Read more »

A boy with a gold crown stands stoically looking straight ahead.
International Stock News

Can anyone topple Nvidia as the king of artificial intelligence investments?

There are many comparisons, but nearly all fall short.

Read more »

A woman stands triumphant with arms outstretched as she overlooks a city at sunset.
International Stock News

Nvidia shares reach world's most valuable milestone. Where to now?

Nvidia beats out Apple and Microsoft to be number one in the world.

Read more »