Why cryptocurrencies like Ethereum, Cardano, Shiba Inu, and Cosmos have plunged today

What happened

The weekend continues to be a difficult time for cryptocurrency holders. The stock market closes on Saturdays and Sundays, but digital assets trade 24/7, and Saturday has repeatedly been a down day for the cryptocurrency market over the past month. .

There have been declines in the cryptocurrency industry today, but a few were more notable than others. Ethereum (CRYPTO: ETH) continues its fall, dropping 5.1% in the past 24 hours at 4:20 p.m. ET. Ethereum’s value has fallen 17% over the past week and 31% over the past 30 days, hitting the dreaded price of $ 3,000 in afternoon trading today before it crashes. straighten slightly.

Cardano (CRYPTO: ADA) fell 5.5% in the last 24 hours, Shiba inu (CRYPTO: SHIB) is down 5.9%, and Cosmos (CRYPTO: ATOM) is down 13.7%. These are all known as altcoins and are generally more volatile than their bigger crypto rivals, but they’re big dips no matter how you look at them.

Image source: Getty Images.

So what

The sharp drop in cryptocurrency values ​​started around 11:00 a.m. ET and lasted for about two hours before leveling off. Considering it’s a weekend and there isn’t a lot of news and cryptocurrencies are selling at all levels, it looks like a short-term trading phenomenon.

One factor to consider is the number of digital asset trading accounts being liquidated due to exceeding margin limits, which is another way of saying that an exchange has forced a cryptocurrency holder to sell. to ensure that debts are repaid. According to Coinglass.com, $ 273 million worth of crypto accounts they track have been liquidated in the past 24 hours. Surprisingly, $ 71.9 million was in Ethereum with only $ 53.6 million in Bitcoin (CRYPTO: BTC) even though Bitcoin has a much larger market capitalization. These forced sales may be the reason Ethereum has fallen so much, and related cryptocurrencies that are also creating utilities have followed suit.

Liquidation data can tell us a lot about short-term movements in cryptocurrencies. For example, on December 2-3, 2021, $ 636 million and $ 1.58 billion in long positions (a position that is profitable if an asset’s price rises) were liquidated, causing the market to fall. Today, only $ 211 million in positions have been liquidated so far, but in the last three days, $ 1.24 billion in long positions have been liquidated, so there is certainly some downward pressure. .

All the investment markets are also trying to work on confusing economic data right now. Omicron is sweeping the world, which could negatively impact the economy. We’re also seeing inflation and the US Federal Reserve talking about a rate hike in 2022, which could also slow the economy. These fears have hurt growth stocks recently, and cryptocurrencies are generally correlated with growth stocks, so they are also on the decline.

Now what

Volatility is common in cryptocurrencies, but for most of the past two years the price trend has been on the rise. Now we are seeing volatility play against investors and prices are falling rapidly.

The decline may last for a while as speculators and leveraged traders are kicked out of the market. But hundreds of millions of dollars are invested in creating real utility for cryptocurrencies, whether in finance, fashion, payments or other fields, and in the long run, which is why I am optimistic about the industry. Having said that, the race is going to be a bumpy one and I am prepared for the prices to come down further before they improve.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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