Why Solana, Cardano, Polkadot, and Dogecoin All Plunged Today

What happened 

The cryptocurrency industry is taking a hard hit in trading on Friday, and there doesn’t seem to be any end in sight to the sell-off. Every major cryptocurrency has been down double digits at some point today, and some smaller cryptocurrencies, known as altcoins, are down 20% or more. 

In the past 24 hours, as of 11 a.m. ET, Solana (CRYPTO:SOL) had fallen as much as 19%, Cardano (CRYPTO:ADA) had dropped 16.4%, Polkadot (CRYPTO:DOT) had tumbled 16.3%, and Dogecoin (CRYPTO:DOGE) was off 11.8%. The altcoins were down 14.5%, 13.5%, 13.2%, and 8.4%, respectively, as I’m writing. 

So what 

There have been a number of news items impacting cryptocurrencies this week, but today’s selling seems a bit unprompted. 

One potential impact is the steady climb in interest rates, which is pushing investors out of risky assets like growth stocks and cryptocurrencies and into safer assets. This prompted a growth stock sell-off in late 2021 and into 2022, which cryptocurrencies followed closely. 

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We also saw the $30 million hack of Crypto.com, one of the largest crypto trading sites. The crypto industry has touted itself as being more secure than banks, but hacks continue to undermine that thesis. 

When selling starts in cryptocurrencies, it can often lead to rapid swings because leveraged positions can get liquidated by exchanges. According to coinglass.com, $874 million of cryptocurrencies have been liquidated in the past 24 hours alone, which has exacerbated losses. 

Now what 

Volatility hasn’t left the crypto space, and today’s pace of selling shows just how quickly the market can turn. There are a number of potential drivers, which I highlighted above, but the reality is that sellers came out in force and buyers seem to be drying up. 

This is why I like to focus on the utility being built on a cryptocurrency and how people will be using it years from now. Solana, Polkadot, and Cardano are three of the leaders in building that utility and are well positioned as developers build out an ecosystem of products and services that get wider use. But for now, there’s still a lot of speculation about specific cryptocurrencies and how their underlying technology is being built out. 

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I don’t see this volatility slowing down, and that may mean values will continue to fall as investors look for opportunities elsewhere. But long term there are billions of dollars flowing into the crypto economy, and the winners in that battle should do well long term. It may not seem that way today, but cryptocurrencies still have a bright future.