Why Dogecoin Was a dog of an Investment on Friday
Key Points
Investors were clearly focused on safer assets.
This was reflected in a notable rise in bond yields.
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Dogecoin (CRYPTO: DOGE) couldn't be considered a good boy for investors late Friday afternoon. As of 4 p.m. ET, the leading meme coin was trading down by almost 3% amid negative sentiment affecting a wide range of cryptocurrencies.
In the doghouse
There were no developments specifically with Dogecoin that were sufficient to move its price that day. Rather, the pooch-themed crypto was at the mercy of broader geopolitical and macroeconomic developments, putting the kibosh on many digital coins and tokens.
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The most immediate of these on Friday was a relatively significant jump in the yields of benchmark bonds such as U.S. Treasury notes. While such movements are always driven by numerous factors, a very impactful one was yet another rise in global oil prices (due, naturally, to the ongoing conflict with Iran).
Investors sold out of reliable debt instruments like T-notes in anticipation of higher coupons from new bonds issued after Federal Reserve rate hikes. Such hikes are becoming more of a possibility as the threat of inflation increases, driven by causes such as the trajectory of "black gold." And when yields rise, the attractiveness of relatively risky investments wanes. Exhibit A: cryptocurrencies.
And within that asset category, meme coins are considered riskier still, as they are often seen as frivolous and lacking utility.
Usefulness is key
Dogecoin's developers have been laboring hard to shed the unserious image that continues to dog (sorry) their financial instrument. I think the coin has more use than many realize, though that doesn't make me bullish about its future. At times like these, I think it's smart to go bargain-hunting for oversold coins and tokens, but it's best to focus on utility cryptos rather than Dogecoin and its ilk.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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