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Why Bitcoin, XRP, and Dogecoin Look Weak Today

Why Bitcoin, Dogecoin, and Ethereum Investors Are Panicking Today
Written by publisher team

What happened

Cryptocurrency prices started the week on a weak note on Monday. Here’s how some of the best-known names in the industry performed as of 9:45AM ET:

  • Bitcoin (CRYPTO: BTC) It is down 1.7% in the past 24 hours, according to data from Coindesk.
  • XRP (CRYPTO: XRP)The coin, which is closely related to Ripple, is doing a little worse – down 2.6%.
  • Dogecoin (CRYPTO: DOGE) Slither 2.9%.

But on the bright side Ethereum (CRYPTO: ETH) It is only 0.9%.

Image source: Getty Images.

so what

So what is bothering cryptocurrency traders today? It may be a lack of leverage.

One of the main articles on Coindesk’s top crypto site this morning is an opinion piece warning about “low system-wide leverage” as crypto exchanges FTX and Binance restrict traders to 20x leverage on their trades – meaning when buying cryptocurrencies, they must now pay 5% upfront on purchase, instead of 1% previously.

Although another exchange, BitMEX (which still allows 100x leverage), tells Coindesk that 100x leverage is “very rare” in its market, and is often a strategy used by traders with the least money available to move the markets, for example. Example, individual investors. In theory at least, restricting the leverage that traders can trade should reduce trading volumes somewhat — which is why Coindesk thinks that price swings in the cryptocurrency market should become “touch manipulation” in the future.

What now

Of course, taming the markets should work in both directions – it should reduce frequency and cap cryptocurrency prices rise (Bad for investors) but also the frequency and maximum with which cryptocurrency prices are made Drops (Good for investors).

But why would this balancing effect cause Bitcoin, XRP, and Dogecoin prices to drop today? To answer that question, you’ll want to ask John Paulson, the hedge fund trader who became famous in 2008 for shrinking the housing bubble.

In an interview with Bloomberg over the weekend, Paulson talked about the advantages of investing in gold, comparing them to the risks of investing in cryptocurrencies, which he warned is a “bubble” and “a limited supply of nothing.” Paulson explains that cryptocurrencies like Bitcoin and its ilk can go up because there is a limited amount of them you can buy. But simply “there is no intrinsic value to any cryptocurrency,” and for this reason, cryptocurrencies are expected to be – All Cryptocurrencies – “will go to zero” in the end.

An expectation like this, from an investor with Paulson’s reputation, should be the reason why cryptocurrency prices are falling today.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

About the author

publisher team