Why Dogecoin Is Plummeting Today

Key Points

• There appear to have been significant forced liquidations of long positions over the past 24 hours.

• This has become a growing Sunday-night trend, according to The Kobeissi Letter.

• It's not uncommon to see the broader crypto market move in concert.

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Since yesterday afternoon, the price of the meme token Dogecoin (CRYPTO: DOGE) is trading 8.6% lower as of 10:31 a.m. ET today. There is no obvious reason behind the move, but the broader crypto market seems to be struggling due to large liquidations.

A Sunday night trend

According to a markets-based newsletter called the Kobeissi Letter with nearly 1 million followers on X, over $1 billion of long positions on Bitcoin, the world's largest cryptocurrency, were recently liquidated after Bitcoin's price began to fall. The Kobeissi Letter said it has been tracking this trend for over a year and large Sunday-night sales have become common.

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"As we frequently see during the Sunday night session, low liquidity has led to a large wash-out," the Kobeissi Letter wrote on the platform X. "The dip is frequently bought into the US market open."

It's also possible that investors are reassessing their positions after the Federal Reserve lowered interest rates last week for the first time this year. Crypto typically performs well in a falling-rate environment, but Fed Chair Jerome Powell called the decision a "risk management cut", and Fed members indicated they expect fewer rate cuts next year than the market has been expecting. Some investors took this as a hawkish signal.

Nothing atypical for crypto

If you invest in crypto, than this kind of volatility is nothing new. Forced liquidations and flash crashes happen every now and again, and the Kobeissi Letter even said the Sunday-night sell-off was common. While I am not overly concerned about this sudden drop, I still have no interest in Dogecoin, due to its lack of real-world utility.

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Bram Berkowitz has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.