Why Ethereum, Bitcoin, Dogecoin, and Solana All Crashed Today

What happened

Cryptocurrencies fell across the market early Friday morning as the world grappled with news of another variable of COVID-19. Stock markets tumbled in pre-market trading, but cryptocurrencies, which are traded 24 hours a day, started dropping shortly after midnight ET.

Bitcoin (CRYPTO: BTC) It has been slipping for nearly a month, but that trend accelerated early Friday. The value of the largest cryptocurrency is down 7% in the past 24 hours as of 9AM ET and down nearly 21% since it reached nearly $69,000 in early November.

Smaller cryptocurrencies have fallen even more difficult in the past 24 hours, with Ethereum (CRYPTO: ETH) down 9% Dogecoin (CRYPTO: DOGE) by 8% and Solana (CRYPTO: SOL) It fell 8.3%.

Image source: Getty Images.

so what

The World Health Organization has scheduled a special meeting today regarding a new type of COVID-19 that is spreading in South Africa and possibly more countries. The data is very early, but this variant has been associated with greater transmission and greater immune avoidance than previous strains.

Cryptocurrencies weren’t the only assets to be dropped today. Oil is down 6.5%, and primary stock markets are down 1% to 2% as well. This is a massive sell-off, and cryptocurrency is just something that investors are selling.

What now

Today’s move appears to be what is known as risk aversion trading. Investors sell risky assets in favor of cash or safer assets such as Treasuries. It should come as no surprise, then, that US 10-year Treasury yields fell by 10 basis points to 1.53% as investors tried to buy government bonds.

It’s worth noting that Friday is a short trading day during the holiday week, and this generally leads to volatility as Wall Street traders take a vacation. This could lead to some larger-than-normal moves, which can amplify today’s trading.

Given the fact that cryptocurrencies are more volatile than the market in general, it is not surprising that they amplify market movements. What is clear across the board is that this is also a speculative move by the market. It is not clear how this strain of COVID-19 will spread or where and what the economic impact will be. For now, traders are speculating that this will hurt markets and force central banks to keep interest rates low for a longer period. In time, we’ll see if that happens.

What I think is clear today is that cryptocurrencies are a mess right now. Values ​​are down 20% or more in many cases, and if investors are no longer buying risky assets out of fear of an economic slowdown from COVID-19, trillions of dollars in stimulus may not follow, as they have for the past 18 months. So far, the cryptocurrency has not been a hedge against falling markets, in fact it has only heightened the market’s reaction, which is happening again today.

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