After a week of heavy volatility, altcoin prices appear to be stabilizing.
In fact, the 7-day charts of the largest altcoins by market cap are still looking red. Chainlink (LINK) fell by around 12 percent, Uniswap (UNI) by 8 percent; Polygon (MATIC) has decreased by 5 percent. Binance Coin (BNB) and DogeCoin (DOGE) are down a little more than 10 percent. Bitcoin Cash (BCH) is down 17 percent, while XRP and Polkadot (DOT) are down 25 and 33 percent, respectively, in seven days.
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However, the 24-hour charts on each of these coins tell very different stories. It appears that altcoin investors bought the dip: LINK is up more than 23 percent in 24 hours, while MATIC is up more than 27 percent. UNI is up more than 11 percent; The BNB has increased by almost 9 percent in 24 hours, while the price of DOGE has increased by 1 percent. BCH is up 6 percent; XRP is up 5 percent while DOT is up more than 10 percent.
Additionally, Ethereum (ETH), which fell below $ 1,800 for the first time since March 31 on May 23, is up nearly 10 percent in 24 hours and down a little more than 2 percent in 7 days. Cardano (ADA) did even better, with a 24-hour gain of 13 percent versus a 7-day gain of 1.57.
The total market capitalization of cryptocurrencies excluding Bitcoin rose from $ 945 billion to $ 1.01 trillion in the past 24 hours.
What caused the altcoin market roller coaster last week? And what is causing the markets to stabilize now?
Beats on Bitcoin (BTC)
Many analysts agree that a major factor was the price of Bitcoin, which took a hit last week after China declared its intention to crack down on crypto. Around the same time, Tesla founder Elon Musk announced that his company would no longer accept BTC payments, citing environmental concerns. The negative news was compounded by 775,000 leveraged BTC positions that were immediately deleted when the price of Bitcoin fell.
As a result, Bitcoin fell nearly 30 percent over several days. The decline was a sharp reminder that while BTC is gaining traction as a “store of value,” it is nowhere near as stable as it appeared to be at the start of the year.
Monica Eaton-Cardone, co-founder and COO of Chargebacks911, told Finance Magnates, “A lion eats meat. Lots and lots of meat. They do that. So if you own a lion, don’t be surprised that he’s a voracious meat eater. Likewise, a speculative, cutting-edge investment like Bitcoin will fluctuate widely. They do that. “
“If you expect the crypto market to stabilize, you will likely be disappointed.” It’s still a highly speculative, unpredictable investment, and I believe short-term fate is leaping from towering peaks to lows in valleys. “
“Fluctuation should be our expectation, as stability will be the exception. So the good news is that the crypto market will absolutely rebound. The bad news is that it will crash again too. And you know what? Both could happen in the same week. “
Is the extreme volatility in the altcoin markets over?
In fact, either could happen these Week, while the death that plagued the crypto price last week may have stalled, the journey could start over at any moment.
Garrette Furo, blockchain consultant and consultant for the Cosmos network, told Finance Magnates: “The assumption that the cyclical or higher downward movement of the time frame has stopped is not certain.”
“The digital asset markets are known to be volatile and it remains to be seen whether or not this is an upturn,” he said. Nonetheless, Furo believes: “The basics in terms of network usage, versatility and development power are growing every day.”
And while the volatility of the crypto market can seem bizarre at times, Furo explained that the insanity of price movement has a method: “Price suggests that the market is strongly driven by momentum and the correlations rise to 1 on the way up and the way down, ”he said. “This is usually immortalized in the news.”
In other words, as soon as sentiment in the crypto market reached new highs, it was over: “The positive sentiment flowed out of the news cycles and brought cryptos to an all-time high. [and was quickly] Taken away from the media adding to the uncertainty about China’s mining laws and bitcoin’s energy consumption, ”Furo said. “My guess is that the market will likely follow Bitcoin, and in that regard, altcoins are in danger of falling further.”
Investors may buy their favorite coins at a “discount”
Peter Jensen, CEO of RocketFuel Blockchain, pointed out to Finance Magnates that many crypto investors see price cuts as positive. Last but not least, these dips are an opportunity to buy more of the coins they love.
“Price volatility is a characteristic of crypto and not evidence of its uncertainty – this applies to both BTC and many altcoins,” he said. “Investors have viewed it as a quality of cryptocurrency and have rushed to buy crypto during the slump, proving that there are investors who see it as an opportunity and are rushing to buy crypto even if the market falls in one day cheap prices.”
In fact, it appeared to be at press time. In the list of the ten most important cryptocurrencies by market capitalization, the 7-day prices for large-cap Altcoins had fallen by double digits, while the 24-hour prices flashed green. This is an indication that investors have started buying up their favorite coins at lower prices.
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“The dip buying showed that major investors remain confident that cryptocurrencies are optimistic in the long term. Recent statistics from IntoTheBlock have shown that the number of addresses holding Bitcoin (holders) for over a year has increased by 120,000, from 21.81 million to 21.93 million. The appetite grows. “
Jensen therefore said: “It’s not so much about whether altcoins are in danger of falling further, but rather that investors have the tolerance to deal with persistent fluctuations and unpredictability.”
Crypto is at the mercy of a “rather bizarre combination of market forces”.
Indeed, media coverage plays an incredibly important role in crypto markets, especially at a moment when so many investors are first stepping into crypto markets.
Earlier this week, Samson Mow, CSO of Blockstream, Finance Magnates pointed out that while the negative news from China and Tesla had a significant negative impact on the crypto markets, both news were repetitions of two narratives that had been at play in cryptography for years are: that China is taking action against crypto markets and that Bitcoin has a serious environmental problem.
However, the media reports on cryptocurrency markets are not the only factors influencing prices.
“In historical comparison, the crypto market is subject to a rather bizarre combination of market forces,” Eaton-Cardone told Finance Magnates.
For example, while the announcement that Tesla would no longer accept BTC was significant, Mr. Musk has moved the crypto markets with much less: “If Elon Musk had tweeted about the US bond market, investors would practically not react. No effect at all, ”she said.
We should remember that Elon is a #bitcoin noob who makes the same noob mistakes.
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The “Elon Musk Effect” still has an overwhelming impact on the crypto markets
“The fact that he was able to shake the crypto market so dramatically shows the weakness of crypto. Your Bitcoin portfolio could be your lottery ticket, and it could ultimately increase in value and make all of your dreams come true, but it is still a very vulnerable investment. “
But even with high volatility and fluctuating price movements, crypto, and especially Bitcoin, seem to have an unwavering base of old-school followers: “Some people are clearly attracted to them [crypto] for philosophical reasons, ”explained Eaton-Cardone. “You are libertarian and have a copy of Atlas Shrugged on your coffee table.”
“For them it is both a moral and a financial investment. Much like the people who have turned to crypto for dissatisfaction with the government’s rules, regulations and financial policies, they will give crypto every benefit of the doubt,” said she. “Elon Musk might have the power to rock the crypto market with a single tweet, but ironically, it is his extremely wealthy, tech-savvy acolytes, admirers, and contemporaries who have given crypto a significant built-in basement.”
DeFi use cases are still growing
In addition to media reports and die-hard crypto supporters, last year’s DeFi movement has increased the role of another important influencing factor on crypto prices: use cases. Last year, decentralized credit platforms, liquidity protocols, data oracles, stock exchanges and more increased in the so-called “DeFi summer”.
While these projects have grown, Defi is still incredibly new. Dr. Klaus Kursawe, Blockchain Researcher at Vega Protocol, told Finance Magnates: “The entire field of DeFi projects is so new that it should come as no surprise that teething troubles affect individual projects or the entire infrastructure that requires constant improvement and is added Elasticity.”
“Although we can build on a large number of research results, the effects of DeFi applications are the requirements for speed and throughput, scalability, cost efficiency or economic factors such as fair business models for miners and the management of MEV (miner) / maximum extractable value) evolves in a relatively short period of time, ”he said.
“However, none of these issues are fundamental obstacles and forward-looking projects are already addressing them.”
Will 2021 see another “DeFi Summer”?
In addition, Dr. Kursawe points out: “Ethereum is switching to a new version that can increase speed and energy efficiency, and other projects are developing and implementing even more performance-optimized blockchains.”
“MEV (which has caused $ 286.3 million in damage in the past 30 days) is being addressed through fairness protocols and fair mining pools, and new solutions to other problems such as lack of diversity are being actively explored. And while no one can predict how DeFi summer will play out, we can say that the current moment in DeFi is more like “spring” than summer’s past. “
In other words, while the market may still recover from negative measures last week, things could get better, and optimism is not limited to DeFi: Eaton-Cardone also said, “As we bounce back from the pandemic, forecast many a return to the 20s with pent-up people who want to throw away their masks, spend money, have fun and enjoy life to the full again. “
“At the same time, fiscal incompetence and political irresponsibility are unlikely to suddenly end. That certainly sounds like a crypto-friendly forecast. At least in the short term. “