Several cryptocurrencies were trading lower Monday as the backdrop for the sector remained difficult and as investors waited on the latest inflation data, which is due out Tuesday morning.
Between late afternoon Sunday and 10:46 a.m. ET Monday, the price of the meme token Dogecoin (DOGE 3.14%) fell by roughly 6.4%. Its fellow meme token Shiba Inu (SHIB 4.67%) was off by 3.2%, while Solana (SOL 7.47%) was down about 3.7%.
The crypto industry continues to face major backlash in the wake of the FTX debacle. FTX, one of the largest crypto exchanges in the world, recently filed for bankruptcy, and many media reports and other information sources indicate that its founder and CEO, Sam Bankman-Fried, likely committed systemic fraud by using customer deposits to prop up his trading firm, Alameda Research.
Investors are now questioning how much trust they can place in the entire crypto industry, which is also receiving fresh scrutiny from lawmakers. Sen. Jon Tester (D-Montana) recently said on Meet The Press that he personally sees no reason why crypto should exist. That was only Sen. Tester’s opinion, but it gives you an idea about the way attitudes toward the crypto space are shifting in Washington.
Additionally, a Reuters article published Monday morning, citing anonymous sources, said Justice Department prosecutors are divided on whether or not to file criminal charges against the large crypto exchange Binance.
Prosecutors have been investigating Binance since 2018 over whether the company violated U.S. anti-money-laundering laws. Some prosecutors believe they already have enough evidence to move against Binance and even file charges against its CEO, Changpeng Zhao, according to the Reuters article. The prospect of a high-profile Justice Department case against one of the largest crypto exchanges in the world is only adding fuel to the negative sentiment around the industry as a whole.
Investors also await the Consumer Price Index (CPI) report for November, which will be published Tuesday. That metric is a key economic gauge that tracks inflation based on the prices of a market basket of consumer goods and services. Prior to the FTX meltdown, cryptocurrencies were trading in sympathy with tech stocks. As the Federal Reserve rapidly boosted interest rates to fight high inflation, valuations in both the tech sector and the crypto space got hammered because riskier assets and high-growth stocks became much less attractive to own.
In October, the CPI rose by 0.4% month over month, a result that was below economists’ consensus expectation. That signal that inflation is slowing down was encouraging to investors, and drove stocks higher. Investors would be happy to see another monthly report on Tuesday showing that inflation is easing.
The entire crypto space is still awash with the negative sentiment generated by the FTX scandal, and it’s also beset by difficult market conditions that have hammered the prices of most tokens this year.
I still really have no interest in Dogecoin or Shiba Inu. Both tokens are incredibly speculative assets that never seemed to display any strong technical capabilities or real-world use cases that differentiated them from other cryptocurrencies.
Solana has much more potential given its ability to process thousands of transactions per second on its network. I think that token has struggled more than others recently due to its association with the FTX situation and the fact that Alameda Research holds a large number of Solana tokens.
Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Solana. The Motley Fool has a disclosure policy.