The largest cryptocurrency Bitcoin has tumbled 10 per cent in the last one week to test the $40,000 mark on Monday. Ethereum has lost 20 per cent in the same duration and was hovering around $3,000 levels.
Some of their peers suffered a greater degree of pain. Altcoins, including Gala, Loopring, Axis Infinity and Bora eroded between 25-32 per cent of their value in the last one week.
Analysts attribute Fed‘s hawkish commentary, expected rate hikes, lower risk appetite and lower funds for cryptos as key reasons behind the carnage on crypto mart.
Raj A Kapoor, Founder, India Blockchain Alliance said, “An inherent fear of a broad regulatory crackdown and lack of fundamental value has sent most altcoins plunging. Trends in the US are a harbinger for most cryptos.”
With inflation figures at an all-time high, a further drop in prices will bring more agony for investors in the coming days, suggested market experts. The US will release its inflation data later in the week.
Altcoins have more potential than most cryptocurrencies but they follow in the footsteps of Bitcoin. Given their high volatility, they are also more vulnerable to steep falls in a short time, experts said.
Hitesh Malviya, founder, itsblockchain said altcoins will continue to drop as the dominance of Bitcoin increases. However, he is anticipating some relief soon.
“Most of the altcoins are oversold at this moment. We could see a few green days, but overall they remain bearish in the higher time frames,” Malviya said.
Among other top plays from Metaverse and DeFi space, Aave, Basic Attention Token, DeCred, SushiSwap, The Sandbox, Fantom, Helium and Enjin Coin have lost at least 20 per cent of their value in the last one week.
Barring the US Dollar pegged stablecoins, not a single crypto token among the top 25 coins (based on the marketcap) has been able to deliver positive returns over last week.
The jittered sentiments are visible in the low volume of the crypto market, which is barely able to hold above $100 billion off late. However, analysts believe that long-term investors should not miss the opportunity to buy these tokens at lower prices.
Malviya said investors can use upcoming relief rallies to trim their losses. Although, long-term investors should not use cut positions and rather use the dips to average their costs.
Cryptocurrencies are rapidly gaining adoption at various levels across the globe and altcoins represent the forefront of innovation in this sector, said Kapoor. “New developments such as DApps and DEX were virtually unheard of a few years ago, which are now more than $150 billion each,” he added, with a recommendation to buy on dips.
That said, Sharat Chandra, VP- Research & Strategy, EarthID suggested that investors should minimize their exposure to altcoins and increase the allocation of layer 1 and layer 2 tokens.
