At 1:00 pm ET, Bitcoin (BTC 1.83% ), Ethereum (ETH 1.69% ), Y Cardano ( THERE ARE -0.30% ) they appreciated 3.3%, 1.2% and 4.8%, respectively. Earlier in the day, Ethereum showed a 24-hour gain of 3.8%. These modest upward movements have coincided with fairly strong momentum this weekend, in the immediate aftermath of a sell off early Saturday that hit the cryptocurrency market yesterday.
Cryptocurrency investors appear to be taking a wait-and-see approach to these large-cap cryptocurrencies, in the wake of what turned out to be a busy week for these major tokens. Each of these three tokens began their liquidation on Wednesday, following a congressional meeting between top cryptocurrency CEOs and legislators to discuss the potential for regulation in the cryptocurrency market earlier this week.
Bitcoin, Ethereum, and Cardano make up about 65% of the combined cryptocurrency market. These blockchain networks are behind the vast majority of real-world use cases in the world of cryptocurrencies. Consequently, investors often see these top 6 tokens as indicators of the direction the wind is blowing in the cryptocurrency universe.
This week’s choppy price action suggests that investors are increasingly concerned about the regulatory outlook for the cryptocurrency market going forward. Capital inflows to the crypto market may be hampered by increased regulation, and tax concerns related to Biden’s spending bill are already generating headwinds for this sector.
Also, early enthusiasts jumped into the crypto market due to the idea that the government cannot touch this asset class. The privacy and anonymity provided by major cryptocurrencies are some of the key reasons investors have jumped on board. The lack of ties to the government, regulators, or other large financial institutions also plays an important role in their investment thesis.
Therefore, there is concern that any kind of appeasement effort by the big cryptocurrency players could affect the investment thesis for this entire sector, which would have adverse impacts particularly for large-cap tokens such as Bitcoin, Ethereum. and Cardano.
Based on initial conversations between prominent cryptocurrency figures and regulators, it appears that the market is weighing the possibility of extensive regulation being established in the cryptocurrency space. For investors, these headwinds can be difficult to value, leading to some short-term volatility in the price of these important tokens.
This weekend, it looks like these top three tokens are starting to find some balance. There have been many peaks and valleys in the past. And perhaps this is just the latest volatile change in a march towards new all-time highs.
However, the risks associated with investing in cryptocurrencies are still much higher than most asset classes. Consequently, the wait-and-see approach is taking the market right now with these top tokens may be justified.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are variegated! Questioning an investment thesis, even one of our own, helps all of us think critically about investing and make decisions that help us be smarter, happier, and wealthier.