Why Dogecoin Is Sinking Today

Key Points

• Crypto has been moving higher in recent days as investors brace for a U.S. government shutdown.

• Cryptocurrencies can perform well when the mainstream financial system struggles.

• However, a shutdown could slow the U.S. Securities Exchange Commission, which is expected to soon approve many new spot-crypto exchange-traded funds.

• 10 stocks we like better than Dogecoin ›

Since yesterday afternoon, the price of Dogecoin (CRYPTO: DOGE) had fallen roughly 3% as of 10:46 a.m. ET for no obvious reason. Traders appear to be digesting the fact that the U.S. government is preparing for a potential shutdown.

Dogecoin is unpredictable

Odds of a government shutdown have increased significantly, as of this writing. The government is set to run out of funding at 12:01 a.m. Wednesday unless President Donald Trump, the Republicans, and Democrats can come to some kind of agreement.

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Crypto prices, including Dogecoin, have been on the rise in recent days, as a shutdown has become more likely. Crypto is viewed as an alternative currency, so when things go poorly for the mainstream financial system, cryptocurrencies can perform well. However, it's possible that investors today are worried about how a shutdown could impact several legislative victories for crypto passed by Congress earlier this year.

Additionally, Wall Street analysts expect the U.S. Securities and Exchange Commission (SEC) to approve a wave of crypto-spot exchange-traded funds (ETF) in October, including one for Dogecoin. A government shutdown could slow the SEC's work.

This could be nothing

Crypto is inherently volatile, and Dogecoin as a meme token is even more volatile, so its price moves can't always be explained. I suspect the movement today has to do with investors digesting the implications of a looming shutdown. Regardless, I would still recommend avoiding Dogecoin as an investment due to its lack of real-world utility.

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Bram Berkowitz 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.