Why Cryptocurrencies Like Ethereum, Cardano, Shiba Inu, and Cosmos Plunged Today

What happened

The weekend is still a tough time for cryptocurrency holders. The stock market is closed on Saturday and Sunday, but digital assets are traded 24 hours a day, 7 days a week, and Saturday has repeatedly been a low day for the cryptocurrency market over the past month.

There have been dips in the cryptocurrency industry today but few of them were more remarkable than others. Ethereum (CRYPTO: ETH) It continues to slide, down 5.1% in the past 24 hours as of 4:20 PM ET. The value of Ethereum has fallen by 17% in the past week and 31% over the past 30 days, hitting the frightening price of $3,000 in trading this afternoon before recovering slightly.

Cardano (CRYPTO: NO) decreased by 5.5% in the last 24 hours, Shiba Inu (CRYPTO: gray hair) decreased by 5.9%, and Cosmos (CRYPTO: ATOM) It decreased by 13.7%. They are all known as altcoins and are usually more volatile than their larger cryptocurrency competitors, but these are big drops no matter how you look at them.

Image source: Getty Images.

so what

The sharp drop in cryptocurrency values ​​started around 11:00 AM ET and lasted for about two hours before stabilizing. Given the fact that it’s the weekend and there wasn’t a lot of news and cryptocurrency being sold across the board, this seems like a short-term trading phenomenon.

One factor to look at is the number of digital asset trading accounts being liquidated due to margin limits being reached, which is another way of saying that the exchange forced the cryptocurrency holder to sell in order to ensure that the debt was repaid. According to Coinglass.com, $273 million from the crypto accounts they follow have been liquidated in the past 24 hours. Surprisingly, $71.9 million of that was in Ethereum with only $53.6 million in Bitcoin (CRYPTO: BTC) Although Bitcoin has a much larger market capitalization. These forced sales may be the reason why Ethereum has dropped so much, and related cryptocurrencies that are also building in interest have followed suit.

Filter data can tell us a lot about the short-term movements of cryptocurrencies. For example, on December 2 and 3 of 2021, there were $636 million and $1.58 billion of long positions (a position that would be profitable if the asset price went up) that were liquidated, causing the market to falter. Today, only $211 million of positions have been liquidated so far, but in the past three days $1.24 billion of long positions have been liquidated, so there is definitely downside pressure.

All investment markets are trying to work through the confusing economic data at the moment as well. Omicron is sweeping all over the world, which can negatively affect the economy. We are also seeing inflation and the US Federal Reserve is talking about raising interest rates in 2022, which could also slow the economy. These concerns have been hurting growth stocks lately and cryptocurrencies are generally related to growth stocks, so they are dropping as well.

What now

Volatility is common in cryptocurrencies but for most of the past couple of years the trend in prices has been going up. Now, we see volatility working against investors and prices are dropping rapidly.

The decline may continue for a while as speculators and leveraged traders are kicked out of the market. But there are hundreds of millions of dollars being invested in building real interest in cryptocurrencies whether it is in finance, fashion, payments or other areas, and in the long term that is why I am an optimist in this industry. However, the ride is going to be bumpy and I’m ready for the prices to come down some more before they get better.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.