Markets
The Altcoin Market Is Crashing – Here’s Why and What to Expect Now?
When Bitcoin prices tend to fall, the value of other altcoins also decreases. 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 to Bitcoin as a safe haven amid volatile market conditions, causing altcoins to crash.
In the last week, the altcoin market has been correcting substantially, falling 2.4% in its market capitalization to US$254.943 billion. This decline is due to general market weakness and uncertainty surrounding the launch of the Ethereum ETF, leaving many in the cryptosphere wondering why altcoins are falling significantly.
Factors leading to the fall of Altcoin
The main factor behind the current market correction is the upcoming Consumer Price Index (CPI) release and the FOMC meeting scheduled for Wednesday. Historically, crypto markets have seen downward momentum in anticipation of such events.
For example, previous statements by FED Chairman Jerome Powell have often led to notable corrections in crypto markets. O two previous FOMC meetings caused Bitcoin to fall more than 10% in the week before the events, with altcoins falling even more than 20% as in March.
Impact of the Roaring Kitty saga
An important event that impacted 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) further weaken the case for altcoin growth, leading to a continued downward trend.
Despite the current negative sentiment, there are signs of a possible 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.
What to expect next?
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 her colleagues I wrote a letter to Fed Chairman Jerome Powell calling for a rate cut to ease the financial burden on American workers facing high housing and insurance costs.
The unemployment rate is rising and the European Central Bank (ECB) has already started to reduce rates. These factors suggest that the FED may eventually lower rates to avoid a potential recession.
Furthermore, the Ethereum ETF approval is expected in the coming weeks, which could also positively impact the altcoin market.
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