Dogecoin took a massive hit on Wednesday, falling steeply at 45 percent--from 48 cents to 21 cents in just a 24-hour period. It came amid a wide sell-off due to China's announcements its financial institutions would continue to ban trading cryptocurrencies. It ended 28 percent lower, to around less than 36 cents.
In a CNET report, the China Internet Finance Association said the country's financial institutions will not be allowed to engage in cryptocurrency trading due to the "volatile nature of the digital coins." This is consistent with a similar 2017 ban on the tokens that also led to an enormous Bitcoin sell-off.
Dogecoin Value Slides With Bitcoin, Ethereum
This led to a significant drop in the prices of all major cryptocurrencies, including Bitcoin and Ethereum
Bitcoin had fallen sharply to a little over $30,000 in intraday trading before making a rebound and settling at $37,000 that still accounted for a 12 percent loss, CNET reported. Bitcoin's slide is also attributed to Elon Musk's most recent tweets about Tesla's "diamond hands," which meant the company was not selling its Bitcoin.
Ethereum, meanwhile, slid 25 percent at $2,587, even with news of the network's plan to cut carbon emissions.
Dogecoin's head-scratching drop, along with the other tokens, might not be good news for cryptotraders after an expert warned of tough days ahead.
Dogecoin Value May 'Not Bounce Back' Due to Consolidation
Galaxy Digital CEO and Chairman Michael Novogratz appeared on CNBC's "Squawk Box" (via Deseret News) to relay his projection that the value of these digital assets would not increase for a while.
Novogartz said the "confluence of events" surrounding the price drop would have the cryptocurrency stocks consolidate. Because of this, he said the digital assets are "not going to bounce back."
The crypto expert also said on CNBC that the drop was apparently a "capitulation," in which investors are selling off their holdings amid a steep decline in the market to protect their gains.
He said it might take a long time for the market to consolidate, and traders should not expect that things will be fixed in a few days.
Dogecoin Value Drop 'Normal in Many Volatile Markets'
Another expert sees the development as a "normal in many volatile markets." ZebPay co-CEO Avinash Shekhar said in a Financial Express report that such corrections occur as a result of short-term traders taking profits. This should embolden long-term value investors, he said, to even consider buying opportunities amidst the falling prices.
Dogecoin had already dropped to a third of its value last week after Musk tweeted that the coin was a "hustle" when he hosted NBC's "Saturday Night Live." It eventually recovered after the Tesla and SpaceX CEO's subsequent tweets of collaborating with Dogecoin developers on "system transaction efficiency," which was "potentially promising".
Bitcoin, meanwhile, also took terrible beatings recently over Musk's pronouncements that Tesla will not accept Bitcoin as a payment option in purchasing their cars. A domino effect also led to Ethereum's breakdown last weekend to a negative 14.3 percent premium, its lowest since the start of its listing.
