A key investment case for bitcoin is deteriorating as geopolitical uncertainty and rising inflation hit cryptocurrency prices Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions achieve financial freedom through our website, podcasts, books, newspaper columns, radio programs and premium investment services. You're reading a free article with opinions that may differ from The Motley Fool's Premium Investing Services.Become a Motley Fool member today for instant access to our top analyst recommendations, in-depth research, investment resources and more. The value of major cryptocurrencies fell on Thursday as the stock market fell and investors were worried about inflation and the continued Russian invasion of Ukraine. This follows a day when prices rose after President Joe Biden signed an executive order to study digital assets and investors expected US regulators to finally define rules for cryptocurrencies.
ET, Bitcoin (BTC 1.75%) had fallen to 8% in the past 24 hours, Ethereum (ETH 5.43%) had dropped to 6.3%, and Dogecoin (DOGE 2.17%) had dropped 7.4%. As an asset class that has been correlated with the stock market for the past six months, it's no surprise that cryptocurrency values are falling along with the market due to current uncertainty. Volatility remains commonplace for cryptocurrency investors and that has undermined some of the cryptocurrency cases. Bitcoin specifically has proven not to be a very good hedge for inflation (see today's reaction) or a safe asset like gold.
In fact, it has been traded more like a growing stock than anything else in the past year. I still think that the case of cryptocurrencies is the utility they can bring to the markets. Financial transactions can happen in an instant, digital assets can be traded and verified on the blockchain, and over time, more innovations will be created. That's where true value comes from and, frankly, it doesn't have much to do with the price of cryptocurrencies on a day-to-day basis.
As much as today's measure hurts, I think yesterday's executive order from the White House is much more important. It could pave the way for greater ownership of digital assets, cross-border transactions, and even for the U.S. government to create its own digital currency. That's very optimistic for the industry in the long run, so I have cryptocurrencies and I don't plan to sell even on low days like this.
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Little-known cryptocurrencies may continue to trade at prices that are not correlated with traditional asset prices, but the same may not be true for more established cryptocurrencies, such as Bitcoin and Ethereum.