The cryptocurrency market is once again a sea of red, with recent standouts such as programmable blockchain cardano token ADA leading major cryptocurrencies lower.
At press time, ADA was trading near $1.36, down 10.6% in the last 24 hours. Scaling Solution Polygon’s MATIC token fell 6% even as the network implemented Ethereum’s fee reduction mechanism, which will destroy MATIC tokens and make their supply deflationary. Solana’s SOL token, binance token BNB, and ether each fell more than 2%, while bitcoin traded 1% lower near $41,200, according to data from CoinDesk.
The drop in ADA looks typical of a correction often seen after a notable price rally.
The token jumped nearly 60% to $1.64 earlier this month, outperforming Bitcoin as the imminent launch of SundaeSwap, the first decentralized finance (DeFi) exchange on the Cardano blockchain, accelerated interest from investors. investors in cryptocurrency.
The pseudonymous Twitter-based ADA whale said that some of the reasons for ADA’s recent bull run was popular trader Cobie tweeting about buying ADA at 1.20 and Cardano winner Ethereum founder Vitalik Buterin’s Twitter poll , asked the community which blockchain would be a suitable alternative to Ethereum.
Cardano is likely to be in the news in the coming weeks. “Keep an eye out for the various scaling initiatives coming to Cardano in the coming months,” the ADA whale told CoinDesk in a Twitter chat. “Cardano Chain is currently running at pretty much full capacity, block size will likely increase by the end of the month, next month will see the Babbage hard fork which will help things further.”
While these impending developments may present a new offering under the ADA, the cryptocurrency remains vulnerable to a continued bitcoin selloff, if any.
“There have been select alternative cryptocurrencies that are doing quite well, including cardano. We don’t expect them to hold up very well if we continue this ‘risk off’ sentiment,” Matthew Dibb, COO and co-founder of Stack Funds. , he told CoinDesk in a WhatsApp chat.
Risk aversion weighs on bitcoin
Bitcoin and traditional market risk assets remain under pressure as bond yields continue to rise on expectations of earlier and faster rate hikes from the Federal Reserve (Fed). In particular, the two-year Treasury yield, which tracks short-term interest rate and inflation expectations, hit a new 11-month high of 1.076% shortly before press time.
Earlier on Wednesday, Anna Wong, chief US economist at Bloomberg Economics, said a 50 basis point (bps) interest rate hike at the Fed’s March meeting is warranted, according to FXStreet. Fed funds futures are currently priced at a 93% chance that the central bank will raise rates by 25 basis points in March.
Policy tightening is bearish for asset prices overall. Some observers are of the opinion that the worst may be behind bitcoin.
“Really surprised BTC is holding up while Nasdaq throws up. In hindsight bitcoin selloff led Nasdaq and it looks like BTC has already bottomed out while Nasdaq hasn’t,” an investor tweeted early Wednesday.
While the Nasdaq index fell 2.6% on Tuesday, bitcoin ended the day unchanged. The cryptocurrency has lost almost 40% of its value since mid-November when the Federal Reserve went from predicting a single rate hike in 2022 to three hikes. The tech-heavy Nasdaq peaked after mid-December and has declined more than 8% since then, according to data provided by charting platform TradingView.
Stack Funds’ Dibb said that “the broader crypto market is showing some resilience, with trading volumes remaining low in the absence of any big bids/offers despite stocks recently down.”
Dibb, however, sees a deeper drop if the bulls fail to defend the recently held psychological support at $40,000.
“The market has been looking at the $40,000 handle as strong support. However, a close below this area will likely lead to larger sell-offs and a drop to the mid-30s,” Dibb joked.
Looking ahead, macro factors aside, the market may take cues from the US House Energy and Commerce subcommittee review on the environmental impact of cryptocurrencies scheduled for Thursday.