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Crypto

Why Are All Cryptos Down: The Reasons Behind the Latest Dip

The crypto markets appear to be undergoing a bit of a fire sale right now. And if you’re a recent investor, you might just be seeing red right now. But either way, a whole lot of folks are asking, “Why are all cryptos down?”

Illustration showing the impact of why are all cryptos down.

Well, the major catalyst appears to be the release of the minutes from the Federal Reserve Board’s meeting in December. The news that the Fed plans to wind down the measures employed to prop up the economy during the pandemic spooked investors. The promise of rising interest rates hit the real-estate sector hard. But the tech-heavy Nasdaq fell by 3.3% – it’s worst single day in close to a year. Meanwhile, the Dow fell by nearly 400 points. And this proved that the crypto markets are far from immune to the news that shapes the traditional stock market.

All of this does make some sense, of course. Some institutional investors view crypto as a hedge against inflation. And if things go according to the Fed’s plan, a rise in interest rates could dial back the surge of inflation in the U.S.

But not all markets react the same way to news. Treasury yields saw a noticeable bump. This is what turned the screws on the technology sector. Because these stocks are often valued based on future earnings potential, a rapid rise in the 10-year T-Note makes prognostication a lot less tempting than the sure thing. But naturally, there’s a bit more to the question of why are all cryptos down.

Why Are All Cryptos Down: The Other Reason

For this part, we’re going to lean on investment trend expert, Matthew Carr. He saw all of this coming. Way back at the beginning of 2020, he predicted an explosive couple of years for Bitcoin and its brethren.

I think Bitcoin, with a reward halving just months away, is going to be more explosive in 2020.

As we all know now, Bitcoin did just that. And it kept up that momentum through most of 2021 as well. Aside from the occasional push in the other direction from China, of course. But even despite the downward pressure from China’s banking, securities and foreign exchange regulators, Bitcoin managed to hit an all-time high. But that high note was a brief one. It has since retreated more than 35% in value. And most altcoins have followed suit.

But now, the bull run, may give way to the bears. If you’ll excuse a little FUD, the reward halving isn’t built to last. As Matthew Carr puts it:

… that bull will transform into a bear in 2022. This is another four-year cycle that we’ve seen play out time and time again.

Certainly some food for thought there.

Not All Tokens Go the Same Direction

This is by no means a groundbreaking reveal, but it’s worth noting that beneath the question of why are all cryptos down, not all cryptos are actually down. Not every stock on the Dow or Nasdaq trends in the same direction. And the same goes for crypto. Sure, Bitcoin may act as the bellwether for cryptos in general. But there are always outliers.

While the majority of tokens were in pull-back mode, QuickSwap (QUICK) has quietly gone on a solid run. It was up around 15% in the past day at last check. Loopring (LRC) has clawed back some of its loses since November and is up more than 11% while the rest of the markets appear to be crumbling. And the governance token for the Alchemix protocol, ALCH, is also on the rise.

Even though there may be some dark times ahead for some of the more popular cryptos, that doesn’t mean there aren’t smart investments to be had in the crypto space. Instead of asking, why are all cryptos down, it could be a worthwhile exercise to ask which tokens are poised to buck this trend. Because we think there are a lot of them out there.

Why Are All Cryptos Down: Here’s the Bottom Line

Crypto portfolios bleed from time to time. The volatility is baked in to some extent. Would it be nice if they just constantly sent on an upward trajectory? Of course! But that’s not the way any market works. Long-term holders should be used to this by now. And our message to new crypto investors is don’t panic.

Panic selling rarely turns a profit. And it’s an unreliable trading strategy. For most investors, crypto is a long game. If you want to check out what your could portfolio could become, check out our crypto calculator. It’s a much more useful way of spending your time than asking short-term questions like, “Why are all cryptos down.”

And speaking of good uses of your time, if you’d like to read more of trends strategist Matthew Carr’s analysis, we suggest signing up for his free e-letter, Profit Trends. It’s packed with invaluable research that all investors should know.


About

Matthew Makowski is a senior research analyst and writer at Investment U. He has been studying and writing about the markets for 20 years. Equally comfortable identifying value stocks as he is discounts in the crypto markets, Matthew began mining Bitcoin in 2011 and has since honed his focus on the cryptocurrency markets as a whole. He is a graduate of Rutgers University and lives in Colorado with his dog, Dorito.

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