Altcoins
Why Altcoins Are Sliding Again Today
This isn’t shaping up to be a great week for cryptocurrencies, as some of the top altcoins in the space lost value on Tuesday. A statement from a key issue from the Federal Reserve dampened sentiment, which was already sinking following the recent rally in cryptocurrencies.
That said, Tuesday’s losses were not, overall, huge. Bellwether meme coin Dogemoneta (CRYPTO:DOGE) fell more than 3% in late afternoon trading, while theoretically more serious utility coins Chain shirt (CRYPTO: LINK) e Bitcoin Cash (CRYPTO: BCH) lost 2% and 4% respectively. Aptos (CRYPTO:APT) was also in negative territory, but just down 0.1%.
The Fed speaks and the cryptocurrency world listens
The villains, if you will, in this story are Fed Chairman Jerome Powell and Vice President Philip Jefferson. Both strongly indicated on Wednesday that the likelihood of the central bank cutting the benchmark interest rate was diminishing.
Speaking at an event in Washington, D.C., Powell said, “Recent data clearly has not given us greater confidence and instead indicates that it will likely take longer than expected to reach that confidence.”
Separately, Jefferson opined that the Fed should maintain its position should inflation remain persistent. At a separate event, he said: “The work to sustainably restore inflation to 2% is not done yet.”
That’s the general mood on interest rates expressed these days by the Fed and other government officials following the latest data on inflation, which, according to the Bureau of Labor Statistics, rose 3.5% in March. Unfortunately for rate hawks, this number was higher than economists’ typical forecasts and represented a notable increase over February’s number.
That wouldn’t necessarily be discouraging in itself, but just a few months ago hopes were much higher. At that point, following actually positive inflation developments, Fed officials said they intended to make not one, not two, but three rate cuts this year.
Harmful inflation
The Fed’s key interest rates are not the ultimate solution for cryptocurrency investors, but they are still crucial. When rates rise, the safest securities on the market (considered government bonds) also rise.
When safety opportunities become more attractive, the market as a whole tends to sell off riskier assets. In past years these were technology stocks; Nowadays, cryptocurrencies are up to the task. And the lower the utility of a particular cryptocurrency, the more downside potential opens up underneath it. (Attention, Dogecoin and others memetic currency investors!)
The story continues
Many cryptocurrency bulls will continue to monitor inflation developments. After all, the battle against it may be longer and more difficult than many expected.
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Why Altcoins Are Sliding Again Today was originally published by The Motley Fool