HomeBusinessWhy Dogecoin is sinking this week

Why Dogecoin is sinking this week

Dogecoin (CRYPTO: DOGE) sees a big pullback in this week’s trading. According to data from S&P Global Market Intelligence, the popular meme coin is down 20.6% over the past seven trading days as of 4:00 PM ET Friday.

The Dogecoin token is facing significant selling pressure this week in conjunction with the Federal Reserve’s comments on next year’s interest rate outlook. Investors may get fewer interest rate cuts than previously expected, and the shift in outlook has led to a wave of selling in the cryptocurrency market.

The Federal Reserve held its last meeting on Wednesday and delivered the 25 basis point cut in the benchmark interest rate that investors had expected. Unfortunately, comments from Fed Chairman Jerome Powell came with unwelcome news that sparked a massive increase in selling pressure for both stocks and cryptocurrencies.

For starters, Powell said the decision to make the latest rate cut was not unanimous and was subject to discussion among central bank authorities. Worse still, he indicated that the Fed now expects to make only two additional rate cuts of 25 basis points each next year. The Fed had previously indicated that it expected to make four cuts at that level this year. Dogecoin and other cryptocurrencies saw massive sell-offs on the news due to the possibility that higher-than-expected interest rates will make investors more risk-averse.

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As a meme coin, Dogecoin can sometimes see big moves with little or no news. But that doesn’t mean the cryptocurrency’s valuation is disconnected from the broader macroeconomic backdrop. The Federal Reserve’s new forecast for rate cuts indicates that the central banking authority is still concerned about inflationary pressures, and this dynamic could slow the bullish momentum in the crypto market.

On the other hand, Dogecoin and other top cryptocurrencies have already seen some recovery momentum after the big sell-off sparked by the recent Fed meeting. As of 4:00 PM ET on Saturday, the token was up 4.3% over the past 24 trading hours.

With a less favorable outlook on interest rates, Dogecoin investors may have to depend on the incoming Trump administration and possible promotion of Tesla CEO Elon Musk will fuel the token’s next big bull rally. But even with the recent pullback, the price of the Dogecoin token is up 252% in 2024 trading.

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Before you buy shares in Dogecoin, consider this:

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