Why Bitcoin, Ethereum, and Coinbase Were Sinking Today

What happened

Cryptocurrencies and crypto-related stocks were under pressure again in Wednesday’s trading. Bitcoin (CRYPTO:BTC) and Ethereum (CRYPTO:ETH) were down roughly 4.5% and 4.1%, respectively, over the previous 24-hour period as of 5:30 p.m. ET, and Coinbase Global (NASDAQ:COIN) saw its stock end the daily trading session down 5.2%.

Most top-50 cryptocurrencies are in the red over the last 24 hours of trading, and it looks like investors are taking some money off the table on the heels of recent pricing rebounds. Coinbase stock lost ground amid a pullback for the broader cryptocurrency market despite the Nasdaq Composite index ending the daily trading session up roughly 0.5% and the S&P 500 climbing roughly 0.9%.

Image source: Getty Images.

So what

There doesn’t appear to be any major new cryptocurrency or company-specific news behind sell-offs for Bitcoin, Ethereum, and Coinbase today. With the Federal Reserve likely on track to implement significant interest-rate hikes this year, and a multitude of other risk factors on the horizon, sustained bullish momentum for stocks and cryptocurrencies has been hard to come by early in 2022. Bitcoin, Ethereum, and Coinbase have seen some valuation gains recently, but momentum reversed on Wednesday. 

Despite today’s sell-offs, Bitcoin was up roughly 1.7% over the last seven days of trading, as of this writing, while Ethereum’s Ether token was up roughly 10.3%. Coinbase is also in the green over the last week, with its share price up roughly 10% across the stretch.

Even with dramatic pricing volatility, Bitcoin and Ethereum’s respective tokens have still managed to post significant gains over the last year. 

Bitcoin Price Chart

Bitcoin Price data by YCharts.

Ethereum has far outperformed Bitcoin across the stretch, and there appears to be a general trend of investors shifting toward application-backed tokens and away from those that function solely as currencies and speculative investment vehicles. Still, the tokens each are trading down roughly 46% from the lifetime highs they hit in November. Meanwhile, Coinbase stock is down roughly 43% from market close on the day of its initial public offering and roughly 56% from its lifetime high.

Now what

Cryptocurrencies have generally been bearish, as investors have weighed macroeconomic and regulatory threats and become more risk averse. This trend has extended to Coinbase stock. Huge valuation swings in recent months should make it clear that Bitcoin, Ethereum, and Coinbase are risky investments. 

The cryptocurrency market will likely continue to see volatile pricing action, and it’s reasonable to expect that pricing moves will continue to have a significant impact on Coinbase stock. It’s possible that cryptocurrencies and crypto-related stocks will bounce back from recent turbulence and go on to reach new highs, but there’s still room for more sell-offs, despite the substantial valuation pullbacks. 

Cryptocurrency-valuation trends have tended to be highly cyclical, and the massive price appreciation of Bitcoin’s and Ethereum’s tokens over the last five years could set the stage for more dramatic valuation slides. If the two market-leading tokens suffer more significant bearish pressures, it’s likely that other cryptocurrencies and crypto-related stocks would also be impacted. Accordingly, investors should continue to keep the crypto space’s high-risk, high-reward dynamic in mind. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.