Why Solana, Polkadot, and Apecoin All Dropped on Friday

What happened

Cryptocurrency values took a nosedive early in the day on Friday as investors sold off risky assets. No cryptocurrency was spared and some were off double digits.

Solana (CRYPTO: SOL) was one of the big decliners, falling 8.1% in the last 24 hours as of 1:15 p.m. ET, while Polkadot (CRYPTO: DOT) was off 9.7%, and Apecoin (CRYPTO: APE) had dropped 14%. The sharp decline started just after midnight and hasn’t recovered since.

So what

The cause of the initial drop was actually fear that Europe’s economy would slow down because of inflation. A producer price reading in Germany showed a 37.2% increase in costs from a year ago because of energy costs more than doubling in that time. Germany is very reliant on Russian natural gas and prices have jumped since Russia invaded Ukraine.

Higher producer prices are a leading indicator of inflation, which may pick up in Germany and Europe more broadly. In the U.S., the Federal Reserve’s meeting minutes were released yesterday and were more fearful that inflation will persist for a while than investors may have hoped.

Inflation is usually combatted with higher interest rates and for risky assets like cryptocurrencies an increase in rates generally pushes values lower.

Another bit of negative news was U.S. officials questioning whether the Celsius Network bankruptcy should be investigated. This is another example of potential scrutiny from regulators, which isn’t generally seen as a positive thing for crypto values.

Now what

While this sell-off is big, it’s also very widespread. I don’t see any reason to panic-sell any single cryptocurrency. The market overall is looking for direction as investors figure out what cryptocurrencies are going to generate long-term value, but that’s not going to change in a day.

I would look at what’s being built on each blockchain for long-term value. Solana is clearly a very active developer community, Apecoin will power the Bored Ape Yacht Club ecosystem, and Polkadot could be a great Level 2 blockchain for scaling Ethereum.

It’s also important to keep in mind that a lot of the crypto value lost today was because of liquidations that can crater the market. According to Coinglass, $600 million of crypto positions were liquidated in the last 24 hours, which is likely why the move was so dramatic.

Volatility is something crypto investors have to get used to, unfortunately, and today is a great example of that. But these can also be buying opportunities if you’re able to buy when the market is at its most fearful.

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Travis Hoium has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This news is republished from another source. You can check the original article here.

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