Why Solana’s Cryptocurrency Is Plummeting This Week

What happened

Recent comments from the Federal Reserve led to a big sell-off on high-risk investments, and Solana (CRYPTO: SOL) may be affected by withdrawal. The blockchain network’s cryptocurrency SOL is down nearly 16.5% over the past week as of 4 p.m. ET on Friday, according to data from S&P Global Market Intelligence.

Transcripts of the Federal Reserve’s mid-December meeting were released on Wednesday, the contents of which angered the market and led to a massive sell-off in stocks and growth-driven cryptocurrencies. In addition to significantly reducing bond purchases and raising interest rates, the Fed may also reduce its holdings in Treasuries and mortgage-backed securities, according to recently published meeting transcripts. Add it all up and investors will be looking at a less favorable backdrop for growth stocks and cryptocurrencies.

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so what

Cryptocurrencies have sometimes been described as a decentralized investment alternative that can provide protection from the whims of central banks and stock market volatility. However, recent trading indicates that digital tokens are not immune to macroeconomic stresses. While the leading cryptocurrencies have produced excellent returns in recent years, recent comments from the Federal Reserve indicating a more challenging environment for growth-focused and speculative investment has clearly created downward pricing pressures.

What now

Even with the recent pullback, the Solana cryptocurrency is still up nearly 6,870% over the past year of trading. The SOL token is on the rise thanks to speculative momentum and growing interest in the Solana blockchain ecosystem. Solana provides a network for implementing smart contracts and building decentralized finance (DeFi) applications, and its fast transaction speeds have helped it spark excitement among developers and investors.

for comparison, EthereumThe blockchain’s blockchain network is currently capable of handling approximately 13 transactions, but Solana can process up to 50,000 transactions per second. Ethereum continues to stand as the leading network for building cryptocurrency and DeFi applications, with a market capitalization of approximately $382 billion. Meanwhile, Solana’s market capitalization is now around $43.5 billion.

Solana’s SOL token is likely to continue to climb if the underlying network continues to offer transaction processing benefits and attract participation from developers, but investors must consider the token’s risk-reward dynamic. The SOL token has already made excellent gains, and the overall macroeconomic backdrop could create a more challenging backdrop for the cryptocurrency this year.

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