Altcoins
The Altcoin Market Is Crashing: Here’s Why and What to Expect Now?
When Bitcoin prices fall, other cryptocurrencies, known as altcoins, often follow. Currently, Bitcoin’s market capitalization is $1.33 trillion, accounting for 55.62% of the total market value. This increase in Bitcoin dominance is attracting investors back to Bitcoin as a safe haven, causing altcoins to crash amid volatile market conditions.
It hasn’t been smooth sailing for altcoins. Last week, the altcoin market underwent a significant correction, with its market capitalization declining by 2.4% to $254.943 billion. This decline is due to overall market weakness and uncertainty surrounding the launch of the Ethereum ETF.
Many in the cryptocurrency world are wondering why altcoins are dropping so significantly.
We have some answers for you.
Understanding the market crash
Next CPI statement and FOMC meeting
The main driver of the current market correction is the upcoming release of the Consumer Price Index (CPI) and the Federal Open Market Committee (FOMC) meeting on Wednesday. Historically, cryptocurrency markets have exhibited bearish trends prior to such events.
Fed Chair Jerome Powell’s past statements have often led to notable corrections in cryptocurrency markets. For example, the two previous FOMC meetings saw Bitcoin fall more than 10% in the week before the events, with altcoins falling even further, sometimes over 20%.
The “Roaring Kitty” effect and the impact on the market
A key event that influenced the market was the “Roaring Kitty” saga, which pushed altcoin prices lower. Last Friday’s GameStop correction led to a broader market correction, with some altcoins down more than 20%.
Furthermore, the strength of the US dollar and continued quantitative tightening (QT) have further weakened the reasons for the growth of altcoins, leading to a continued bearish trend.
Is there a bounce on the cards?
Despite the current negative sentiment, there are signs of a potential recovery. Historically, markets have recovered quickly after FOMC meetings. Ethereum has seen gains of around 20% after these meetings, while Bitcoin is up more than 20% since the last Fed meeting.
Investors are watching the situation closely as rising US government debt and weaker economic data suggest a possible decline in interest rates. Senator Elizabeth Warren and his colleagues wrote to Fed Chair Jerome Powell, urging a rate cut to ease financial burdens on Americans facing high housing and insurance costs.
Here’s what’s next
The rising unemployment rate and recent rate cuts by the European Central Bank (ECB) suggest that the Fed may eventually lower rates to prevent a potential recession.
Furthermore, the early approval of Ethereum ETF could have a positive impact on the altcoin market in the coming weeks, potentially reversing the current downward trend. Investors hope that these developments will bring a much-needed boost to the cryptocurrency market.
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Only time will tell whether the altcoin market will recover or whether this will be a sign of a more significant shift. Stay tuned for further updates!