The cryptocurrency market is facing a tough week, with Dogecoin taking the brunt of the losses. Dropping 11% in just 24 hours, the meme-coin's sharp decline is part of a broader sell-off that has seen Bitcoin, Ethereum, and other major coins struggle.
The sell-off could be attributed to profit-taking after a recent bullish phase and market reaction to a hawkish Federal Reserve stance. The drop in Dogecoin's price is significant, extending its weekly losses to over 20%.
Market Sentiment Takes a Hit
The coin's sharp fall contrasts with its earlier rally, where it surged more than 200% between November 4 and December 9. Could Dogecoin maintain its momentum, or is the current slump a sign of things to come?
Dogecoin is only one of the struggling cryptocurrencies. The top cryptocurrency, Bitcoin, once hitting a historic high above $108,000, dropped to $92k on Friday. Other major assets, including Ethereum and Solana, also experienced substantial declines. Ethereum declined 1% and 12% in the past day and week, respectively.
The catalyst for this downturn can be traced to last week's Federal Open Market Committee (FOMC) meeting, where the U.S. central bank's dovish stance was replaced by a more cautious outlook. Federal Reserve Chair Jerome Powell hinted that rate cuts in 2025 may not be as aggressive as previously expected, causing risk assets like cryptocurrencies to falter.
Dogecoin Faces Security Scare
Adding to the turmoil, Dogecoin recently faced a critical security vulnerability that has raised concerns over its stability. A hacker exploited the flaw to crash 69% of the network's nodes, drawing attention to the vulnerabilities within the Dogecoin system.
Though the breach has since been addressed, the incident highlights the challenges faced by the network as it grows. However, the recent security scare could undermine confidence in Dogecoin's long-term prospects.
I used a publicly disclosed (by @TobiasRuck) vulnerability to take down 69% of the Dogecoin network from an old thinkpad in rural el salvador. AMA. https://t.co/BNkGDWkWhu pic.twitter.com/qk16AwMaq5
— Andreas Kohl (@aejkohl) December 12, 2024
Elsewhere, Dogecoin's Co-founder Billy Markus, known as Shibetoshi Nakamoto on social media, shared an interesting message on X (formerly Twitter) regarding the price declines of Dogecoin, Bitcoin, andEthereum.
Markus, who famously distanced himself from Dogecoin years ago, posted a screenshot of the falling prices with a sarcastic message. The recent sell-off has also triggered a wave of liquidations across leveraged positions.
day 3 of being very happy that i quit my job pic.twitter.com/lvEeCaljTz
— Shibetoshi Nakamoto (@BillyM2k) December 20, 2024
A Look at Liquidations
In the past 24 hours, Dogecoin has faced $68 million in liquidations, adding to the downward pressure on prices. Bitcoin and Ethereum also experienced significant liquidation volumes of $257 million and $229 million, respectively.
Will the coin recover from this current slump? Analysts are closely watching key price levels, particularly the $1 mark. The coin could reach as high as $1.50 next year, but only if the market recovers.
For now, though, the market faces uncertainty. Traders and investors will likely remain cautious in the coming weeks, especially as the broader global economic environment continues to influence risk assets likecryptocurrencies.
This article was written by Jared Kirui at www.financemagnates.com.
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