Why Dogecoin (DOGE) Sank Today

Key Points

• After Friday's speech from Fed Chair Jerome Powell sent crypto higher, today was marked by a retreat.

• Dogecoin faces significant inflationary pressure because of its very design.

• 10 stocks we like better than Dogecoin ›

Dogecoin (CRYPTO: DOGE) is falling on Monday, down 10.6% in the last 24 hours as of 5:47 p.m. ET. The drop comes as the S&P 500 lost 0.5%, and the Nasdaq Composite lost 0.3% today.

Dogecoin and the rest of the crypto market are down after last Friday's huge spike following Fed Chair Jerome Powell's address to the nation.

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Rate cuts could be coming

Federal Reserve Chairman Jerome Powell spoke from the Fed's annual Jackson Hole summit on Friday, shedding light on its plans for rate cuts in the near future. Powell painted a complicated picture of the current economy with signs of a slowdown in hiring happening even as other signs point to the possibility that inflation is heating up.

Ultimately, he believes that the economy has proven to be resilient, and though he didn't confirm it explicitly, he seemed to indicate rate cuts were coming in September. Investors reacted strongly to the news, and markets on Friday were green. More speculative investments like Dogecoin saw an outsized spike -- lower rates tend to lead to riskier assets performing comparatively well.

Image source: Getty Images.

Today, investors appear to be weighing how much the Fed will cut. Just as Dogecoin saw an outsized spike on Friday, it saw an outsized dip today.

Dogecoin is meant to be taken lightly

Dogecoin is a meme coin. It is not a serious investment. The coin's "tokenomics" are highly inflationary. That means over time, unless more and more people invest consistently, its price will continue to move downward.

This was created as a joke and a way to have fun -- that is exactly how it still should be treated. There are plenty of crypto projects with proven track records of value like Bitcoin and Ethereum. Choose these or projects like them if you are serious about investing in crypto.

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Johnny Rice 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.