Markets
The Altcoin Market Is Crashing – Here’s Why and What to Expect Now?
When Bitcoin prices fall, other cryptocurrencies, known as altcoins, often follow. Currently, the market value of Bitcoin is US$1.33 trillion, representing 55.62% of the total market value. This increase in Bitcoin dominance is drawing investors back into Bitcoin as a safe haven, causing altcoins to fall amid volatile market conditions.
It hasn’t been easy for altcoins. Last week, the altcoin market underwent a significant correction, with its market capitalization falling 2.4% to US$ 254.943 billion. This decline is due to general market weakness and uncertainty surrounding the launch of the Ethereum ETF.
Many in the cryptosphere are questioning why altcoins are falling so significantly.
We have some answers for you.
Understanding the Market Crash
Upcoming CPI release and FOMC meeting
The main factor behind the current market correction is the upcoming Consumer Price Index (CPI) release and the Federal Open Market Committee (FOMC) meeting on Wednesday. Historically, crypto markets have shown downward trends before such events.
Previous statements by FED Chairman Jerome Powell have often led to notable corrections in crypto markets. For example, the two previous FOMC meetings saw Bitcoin fall more than 10% in the week leading up to the events, with altcoins falling even further, sometimes more than 20%.
The ‘Roaring Kitty’ effect and market impact
An important event that affected the market was the ‘Roaring Kitty’ saga, which drove down altcoin prices. The correction in GameStop last Friday led to a broader market correction, with some altcoins falling more than 20%.
Furthermore, the strength of the US dollar and continued quantitative tightening (QT) have further weakened the case for altcoin growth, leading to a continued downward trend.
Is a recovery in the cards?
Despite the current negative sentiment, there are signs of a potential recovery. Historically, markets have recovered quickly after FOMC meetings. Ethereum saw gains of around 20% after these meetings, and Bitcoin is up more than 20% since the last FED meeting.
Investors are closely monitoring the situation as rising US public debt and weaker economic data suggest a possible fall in interest rates. Senator Elizabeth Warren and his colleagues wrote to Fed Chairman Jerome Powell calling for a rate cut to ease the financial burden on Americans facing high housing and insurance costs.
Here’s what’s next
The rising unemployment rate and recent rate cuts by the European Central Bank (ECB) suggest that the FED may eventually lower rates to avoid a potential recession.
Furthermore, advance approval of the Ethereum ETF in the coming weeks could positively impact the altcoin market, potentially reversing the current downward trend. Investors are hopeful that these developments will bring a much-needed boost to the crypto market.
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Only time will tell if the altcoin market will recover or if this is a sign of a more significant shift. Stay tuned for more updates!