Why Dogecoin Is Sinking Today
Key Points
Cryptocurrencies took a breather, likely due to more hawkish comments made in the Federal Reserve's meeting yesterday.
The U.S. dollar has also been on the rise lately.
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Since yesterday afternoon, the price of Dogecoin (CRYPTO: DOGE) had fallen roughly 5.5%, as of 12:24 p.m. ET today. While moves in Dogecoin aren't always predicated on a specific event, the move today appears to be related to macro events impacting most cryptocurrencies.
Dollar strengthens after Fed minutes
Because cryptocurrencies were created as an alternative currency, they tend to have an inverse relationship with the U.S. dollar, which has come down significantly this year. However, more recently, the dollar has begun to rebound as investors begin to question how many times the Federal Reserve will cut interest rates this year and next.
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Yesterday, the Fed released the minutes from its September meeting. While the Fed continues to be worried about the labor market, which prompted its first rate cut of the year last month, it also expressed concern about elevated inflation.
Specifically, the rate-setting Federal Open Market Committee (FOMC) noted in the minutes that "inflation has moved up and remains somewhat elevated," while adding that the FOMC is "committed to supporting maximum employment and returning inflation to its 2 percent objective."
Some market watchers have speculated that the Fed is not as concerned about returning to its preferred 2% inflation target, which would bolster the case for numerous rate cuts over the next year. But the Fed continuing to express its commitment is hawkish, in my view, considering core inflation (excluding food and gas prices) is still at 2.9%.
Macro will continue to be a big driver of crypto
It's not always clear what's driving crypto on any particular day, but monetary policy, including expectations for how much the Fed will cut rates and the direction of the U.S. dollar, have always been important crypto drivers. Ultimately, I still have no interest in Dogecoin due to its lack of real-world utility, and I think there are plenty of better cryptocurrencies to invest in.
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