'Altcoins' Lead Crypto Lower as Bitcoin Drops to Three-Week Low
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Cryptocurrency losses accelerated, with popular Defi tokens such as Cardano and Avalanche falling more than sector bellwether Bitcoin, as risk aversion sweeps through financial markets.
Bitcoin dropped as much as 6.1% to $40,510, the first time the largest cryptocurrency by market value has been below $41,000 since March 22. Ether, the second largest, was down as much as 9.5%, dipping below $3,000. Altcoin, or alternative coin, Luna was down around 8.4%, while Avalanche was off 10% and Cardano slumped 11%.
Since peaking at just above $48,000 in late March, Bitcoin -- and other tokens -- have been dragged lower by concerns about tighter monetary policy. Even the buzz around last week’s Bitcoin 2022 conference in Miami wasn’t enough to reverse the trend.
“Historically, altcoins have a tendency to over perform Bitcoin to the downside in strong bearish trading environments,” said Josh Olszewicz, head of research at crypto investment firm Valkyrie. “Altcoin trading participants often have less longer-term conviction.”
The Miami crypto conference concluded over the weekend with some very bullish forecasts for both the price and role of cryptocurrencies in the economy of the future. It’s not uncommon for big bullish gatherings like this to create demand for the sector. The challenge in the near-term is the market is very liquidity dependent. Bitcoin tends to do well when liquidity is both cheap and abundant. That’s not currently the case.
The price is falling back to test the three-month sequence of higher reaction lows and will need to bounce from the $37000 area if support building is to remain credible.
Ethereum and the other alt-coins are unlikely to hold up if bitcoin breaks lower.