Home Latest News Why Bitcoin, Ethereum, and Solana Are Plunging Again Today – The Motley...

Why Bitcoin, Ethereum, and Solana Are Plunging Again Today – The Motley Fool

Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing 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 to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
Three of the top five cryptocurrencies in the world, Bitcoin (BTC 0.13%)Ethereum (ETH 0.20%), and Solana (SOL 2.52%), each saw dramatic declines, once again, today. These top tokens had sunk by 2.7%, 4.7%, and 4.3%, respectively, over the past 24 hours, as of 9 a.m. ET.
Market-specific drivers, such as the potential for a reduction in monetary stimulus sooner than expected, appears to be the key driver behind the continued selling pressure we’ve seen among these large-cap cryptocurrencies today. Some token-specific catalysts appear to be at play as well. Solana’s recent decline has been tied to slowing transaction speeds as a result of a new non-fungible token (NFT) project launch on Monday.
Image source: Getty Images.
Some experts suggest that a more hawkish tone from central banks in the U.S. and around the world could prove to be detrimental for top cryptocurrencies, and digital assets in general. The thinking goes that as less cheap money flows around, and higher-yield opportunities become available in the fixed-income world, highly speculative risk assets will see reduced demand.
That said, the same factors that drive this monetary policy (namely, inflation) should theoretically be positive for major cryptocurrencies like Bitcoin and Ethereum. As stores of value outside the stock market, some have come to view these mega-cap tokens as market hedges during times of uncertainty. Indeed, now appears to be a rather uncertain time, with valuations across many high-flying sectors being hit by concerns of inflation-led growth reductions. For cryptocurrencies, a weaker U.S. dollar resulting from this inflation should (again, in theory) boost the value of cryptocurrencies on a relative basis (it will take more dollars to buy a single bitcoin, for example).
Whether these top tokens are more similar to highly speculative risk assets or more akin to market hedges is a truly intriguing debate. In my view, cryptocurrencies encompass some resemblance of both. 
That said, the market appears to be focusing on the high-volatility/high-risk nature of the crypto sector right now. Any asset with the potential to correct materially is being pushed aside in favor of more defensive assets. That makes sense, given the uncertainty in the market right now.
The bottom line is there’s likely more volatility on the horizon. Long-term investors taking a multi-year, or decade-plus, long view of this sector need not worry. This volatility is likely “normal,” or at least in line with historical precedent. However, traders and those with shorter investment time horizons may want to consider what this volatility could mean in the short term. Things are certainly starting to look ugly in the crypto world right now.

Chris MacDonald owns Ethereum. The Motley Fool owns and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
Market-beating stocks from our award-winning analyst team.
Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/08/2022.
Discounted offers are only available to new members. Stock Advisor list price is $199 per year.
Calculated by Time-Weighted Return since 2002. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
Making the world smarter, happier, and richer.

Market data powered by Xignite.

source

Previous articleRussians will be able to buy the iPhone 14 – CNN
Next articleGoogle Pixel 7 colors and chipset confirmed hours ahead of the iPhone 14 launch – TechRadar
She has spent the past eight years playing the role of an infrastructure consultant, and has now joined Inferse.com as a full time blogger. Her current profession is a result of her deep interest in computer gadgets, laptops, gaming accessories and other tech happenings.