Why Did Ethereum Fall 6.4% Today?

Ethereum (CRYPTO: ETH) is down 6.4% in the last 24 hours as of 7:33 p.m. ET on Monday, outpacing Bitcoin's 4.6% decline. Stocks also fell today, with the S&P 500 down 0.6% and the Nasdaq Composite down 0.4%.

Cryptocurrencies across the board are continuing to fall even as the market anticipates an additional interest rate cut from the Federal Reserve. Japan's interest rates could move in the opposite direction, raising the possibility that investors may need to unwind crypto positions leveraged with Japanese yen.

Japan could raise interest rates

While the Fed is expected to cut U.S. rates, the head of the Bank of Japan (BOJ) said on Monday that the Japanese central bank is weighing the "pros and cons" of a rate hike. If the BOJ does raise interest rates, investors who borrowed Japanese yen to purchase Ethereum and other crypto assets could be forced to sell to cover their positions.

Image source: Getty Images.

Today's sell-off was, at least in part, driven by fear of a repeat of 2024's flash crash, when a major unwind led to Ethereum dropping roughly 20% in a matter of days.

Ethereum's decline could have more room to run

Though it stands out among cryptocurrencies, don't mistake its relative stability for safety. Ethereum is still a risky asset. I think the current slide will continue. For more risk-tolerant investors with a long investment horizon, Ethereum is a solid pick.

Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.