Why Altcoins Fell Again on Friday

What happened 

The cryptocurrency market continues to sink to end the week, and altcoins were the most impacted on Friday. That’s not surprising given the fact that larger cryptocurrencies usually rise and fall more slowly than their smaller rivals. 

Four of the most notable moves were Dogecoin ( DOGE 2.17% ) falling as much as 5% as of noon ET, Chainline ( LINK -1.35% ) dropping 6.4%, Shiba Inu ( SHIB 0.57% ) declining 7.1%, and The Sandbox ( SAND ) losing as much as 9.2%. Values have improved slightly from their lows, but this was still a rough few days for cryptocurrencies. 

So what 

There are a number of macro factors that are hurting cryptocurrency values this week, and that’s why the selling is continuing. A main risk is the White House reportedly preparing an executive order to study regulating cryptocurrencies as early as next week. 

On top of the regulation news, the Federal Reserve is expected to raise interest rates multiple times this year, which could continue to put pressure on risk assets like cryptocurrencies. This week, a JPMorgan strategist said they see “massive losses in crypto, because there is nothing there.” Ironically, these comments come shortly after JPMorgan announced a new lounge in Decentraland, a blockchain metaverse. 

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Media coverage of cryptocurrencies hasn’t been kind this week either. CNN Business wrote today about how cryptocurrencies could cause a financial crisis, and Charlie Munger’s distain for cryptocurrency has been all over the financial media this week. 

Now what 

When the market falls like it’s been doing the last few days, it’s common to see cryptocurrency prices come down as well. It’s just that volatile assets like cryptocurrencies typically magnify the stock market’s moves, which is what we’re seeing today. 

I wouldn’t read too much into this move long term, though. Regulation will likely be good for cryptocurrencies and define rules that developers can build on long term. And projects like The Sandbox will likely benefit as a result. 

What I would keep an eye on is the utility being built on top of each of these cryptocurrencies. We are seeing non-fungible tokens soar in popularity and payments systems are being built with cryptocurrencies as well. These could be disruptive innovations for the industry long term and drive tremendous value, even if there’s volatility along the way. 

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The next few months will likely be rocky for cryptocurrencies as regulation and higher interest rates bring uncertainty to the market. But for cryptocurrencies that can bring real value to the digital economy, that’s a long runway of growth ahead, and that’s what investors should focus on.