Altcoins
The Altcoin Market is Crashing – Here’s Why and What to Expect Now?
When Bitcoin prices fall, other cryptocurrencies, called altcoins, often follow. Currently, the market capitalization of Bitcoin stands at $1.33 trillion, or 55.62% of the total market value. This rise of Bitcoin attracts investors to Bitcoin as a safe haven, causing altcoins to crash amid volatile market conditions.
It hasn’t been smooth sailing for altcoins. Over the past week, the altcoin market has seen a significant correction, with its market capitalization falling 2.4% to $254.943 billion. This decline is due to overall market weakness and uncertainty surrounding the launch of the Ethereum ETF.
Many in the crypto space are wondering why altcoins are crashing so significantly.
We have some answers for you.
Understanding the stock market crash
Upcoming CPI release and FOMC meeting
The main driver of the current market correction is the upcoming release of the Consumer Price Index (CPI) and the Federal Open Market Committee (FOMC) meeting on Wednesday. Historically, crypto markets have shown downward trends before such events.
Past 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, and altcoins fall even further, sometimes by more than 20%.
The “Roaring Kitty” effect and the impact on the market
A key event affecting the market was the “Roaring Kitty” saga, which sent altcoin prices lower. Last Friday’s GameStop correction led to a broader market correction, with some altcoins falling more than 20%.
Additionally, the strong US dollar and ongoing quantitative tightening (QT) have further weakened the case for altcoin growth, leading to a continued downtrend.
Is a rebound expected?
Despite the current negative sentiment, signs of a potential rebound are emerging. Historically, markets have rebounded quickly after FOMC meetings. Ethereum saw gains of around 20% after these meetings, and Bitcoin is up over 20% since the last FED meeting.
Investors are watching the situation closely as growing U.S. government debt and weaker economic data point to a possible drop in interest rates. Senator Elizabeth Warren and colleagues wrote to Fed Chairman Jerome Powell asking for a rate cut to ease the financial burden on Americans facing high housing and insurance costs.
Here is the continuation
Rising unemployment rates and recent rate cuts from the European Central Bank (ECB) suggest that the FED could potentially lower rates to avoid a potential recession.
In addition, the expected approval of Ethereum ETF in the coming weeks could have a positive impact on the altcoin market, potentially reversing the current downtrend. Investors are hoping that these developments will provide a much-needed boost to the crypto market.
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Only time will tell if the altcoin market rebounds or if it is a sign of a bigger change. Stay tuned for further updates!