Why Dogecoin Is Sinking Today
Key Points
Dogecoin is falling today due to escalations in the trade war between the U.S. and China.
Trade war dynamics are making investors more risk averse.
Evolving relations between the U.S. and China will likely continue to impact Dogecoin's valuation.
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Dogecoin's (CRYPTO: DOGE) token price is heading lower in Tuesday's trading. The meme coin's token price had fallen 2.7% over the previous 24 hours as of 12:45 p.m. ET. Meanwhile, Bitcoin and Ethereum were down 1.7% and 0.8%, respectively.
The crypto market is seeing sell-offs today as investors react to the latest twists and turns in the U.S.-China trade war saga. Dogecoin is now down roughly 19% over the last week of trading, making it the biggest loser among top 10 cryptocurrencies across the stretch.
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Dogecoin slips as trade war heats back up
Following recent moves by China to restrict the sale of rare earth minerals to non-allied countries, the U.S. has moved to implement new tariffs against China's goods and take other steps to reduce reliance on its geopolitical rival. These developments have prompted a wave of sell-offs across the crypto market, and Dogecoin has been an outsized participant in the pullback.
What's next for Dogecoin?
As a meme coin, Dogecoin may face heightened sell-off risks if momentum in the broader crypto market continues to take a bearish turn. While the token has seen rising levels of adoption and integration into exchange-traded funds (ETFs), it is a heavily speculative investment backed by little in the way of fundamentals.
If relations between the U.S. and China continue to deteriorate, investors' appetite for potentially explosive, high-risk plays in the crypto market could deteriorate in tandem. Alternatively, Dogecoin could see a valuation rebound if the two countries manage to make meaningful progress on a trade deal that de-escalates tensions.
While it's impossible to know exactly where the cryptocurrency is heading in the near term, its token price will likely continue to see high levels of volatility.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
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