Why Did Dogecoin (DOGE) Sink Today?

Key Points

• Expectations for a Fed rate cut lifted Dogecoin last week, but fresh token releases from multiple tokens are pressuring prices.

• Dogecoin remains highly volatile and vulnerable to changes in investor sentiment.

• 10 stocks we like better than Dogecoin ›

Dogecoin (CRYPTO: DOGE) is falling today, down 4.7% in the last 24 hours as of 5:41 p.m. The move comes as the S&P 500 ticked up 0.4%, and the Nasdaq Composite gained 0.9%.

Dogecoin is retreating after last week's run. Economic data released Thursday made imminent rate cuts more likely, boosting Dogecoin and other cryptos. However, significant token releases in the next week are tempering investor enthusiasm.

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DOGE slips as token unlocks blunt rate-cut optimism

The Federal Reserve will make a decision later this week on whether or not to cut interest rates. The market is now fairly certain that rates will be cut following the release of last Thursday's Consumer Price Index (CPI) report and weekly jobless claim data. While inflation remains high, the job market looks to be of more concern.

Lower interest rates tend to lift higher-risk assets like Dogecoin, leading to its rise following the data release. However, enthusiasm has cooled somewhat as the crypto market faces a flood of token releases in the coming week, including 96.5 million Dogecoins added to the market, worth nearly $27 million. Larger unlocks include Solana with nearly 0.1% of its circulating supply released -- worth $120.7 million -- as well as nearly $60 million worth of Worldcoin and $42 million worth of Official Trump token. The releases are inflationary and put downward pressure on asset prices.

Image source: Getty Images.

Dogecoin is built on hype

Dogecoin is a meme coin. Its value is derived from "vibes." That makes it incredibly volatile. The coin also regularly sees additional coins released and is inherently inflationary. I would not invest in Dogecoin.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Solana. The Motley Fool has a disclosure policy.