Because many Altcoins fainted this week

Sooner or later, even the most beloved financial assets obey gravity, no matter how much they have risen. This week we saw a pullback in a number of recently rising altcoins, as a higher-than-expected inflation reading and profit-taking hit the cryptocurrency market.

Over the course of five trading weekdays, according to data compiled by S&P Global Market Insightsstarting late Friday afternoon both Ghost (CRYPTO: FTM) e Theta Network (CRYPTO:THETA) have been trading down nearly 6% since the start of the week. Bite (CRYPTO:TAO) fared worse, down more than 8% over the period.

Wild inflation

A big monster in the room in recent days has been inflation, which has come in higher than many expected: after all, this beast may take some time to tame. On Wednesday, the government’s Bureau of Labor Statistics reported that inflation in March rose 3.5% year-on-year, which was 0.3 percentage points higher than the February figure and significantly above estimates by many economists.

Suddenly, there’s a lot less talk about the interest rate cuts that Federal Reserve (Fed) officials had hoped to begin implementing this year.

The prospect of our current, relatively high rates continuing longer than expected gives cryptocurrency investors pause. Lower rates make boring but safe investments more attractive, as instruments like bonds pay higher interest and become more competitive with risky ones. Despite their growing popularity and the belief by some that they are ideal stores of value, cryptocurrencies must ultimately be considered high risk.

Sometimes, it can take a day or two of trading for discouraging news to impact the market. The following Friday saw a large sell-off in many crypto assets. This includes the Pied Piper behind which every altcoin jumps, Bitcoin. That day alone, the price of Bitcoin was headed lower as of late afternoon trading at a clip close to 5%. And when Bitcoin has bad momentum, your favorite altcoin is probably headed south too.

Business coming?

Some economists are darkly speculating that more inflation “surprises” await us. What doesn’t help right now is the seemingly insatiable demand for housing; prices in this category increased significantly in March.

Where is it going? cryptocurrency? Coins and tokens may be ready for a reckoning, and we shouldn’t be surprised to see a period of correction as investors get used to the current situation. This could, however, provide a good entry point for cryptocurrency bulls – if so, we should keep an eye on altcoins, as the more volatile ones could see excessive price gains during a rally.

The story continues

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Eric Volkmann has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin. The Motley Fool recommends Theta Token. The Motley Fool has a disclosure policy.

Because many Altcoins fainted this week was originally published by The Motley Fool

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