Why Dogecoin is Sinking Today

DOGE-USD -11.32% BTC-USD -6.96%

Key Points

• The price of Bitcoin, the world's largest cryptocurrency, had fallen below $85,000, as of this writing.

• Investors continue to take a risk-off approach to crypto.

• Dogecoin is likely to be even more volatile than the broader cryptocurrency sector.

• 10 stocks we like better than Dogecoin ›

Cryptocurrencies, including Dogecoin (CRYPTO: DOGE), continued to struggle across the board, as risk sentiment soured in the sector. Since yesterday afternoon, the price of Dogecoin has fallen by over 11%, as of 12:21 p.m. ET today.

Rough waters in cryptoland

The market has been more volatile recently, as investors grapple with the artificial intelligence trade and try to understand where the economy might be heading, along with interest rates.

Interestingly, crypto has struggled much more than tech and AI. Bitcoin, the world's largest cryptocurrency and a bellwether for the sector, has declined by over 32% since reaching a peak of more than $124,000 per token in early October.

Crypto is one of, if not the most volatile sectors, and there isn't always a rhyme or reason to the volatility. Some investors believe that movements in Bitcoin and crypto are a precursor to AI and tech stocks. It's also possible that issues with broader liquidity in the economy and a less optimistic view of the trajectory of interest rates are contributing to the struggles.

A domino effect

Sell-offs of Bitcoin and other cryptocurrencies can be more prolonged, as highly leveraged crypto treasury companies may be forced to sell if Bitcoin declines to a certain price. Whale selling can also beget more whale selling. Volatility is a natural part of the game when investing in cryptocurrencies, and that game can go both ways.

Luckily, the crypto sector has already undergone numerous sell-offs, and thus far has always lived to see higher highs. Dogecoin tends to be even more volatile than the broader sector, so it will usually see bigger swings in either direction. I continue to see no real-world utility in Dogecoin and would recommend owning the larger, more established tokens, such as Bitcoin, that have either real-world utility or a better investment thesis.

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Bram Berkowitz has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.

Why Dogecoin is Sinking Today was originally published by The Motley Fool