What happened
For the second day in a row, the prices of many cryptocurrencies were falling on Friday. As usual in bear crypto markets, numerous altcoins of various types were heading downward with the market.
In mid-afternoon, over the preceding 24 hours, the once-hot ApeCoin was ice cold, sliding by nearly 11%. XRP and Litecoin had tumbled by a respective 12% and 13%. Crypto-affiliated stocks weren’t necessarily in the direct line of fire, but a clutch fell into the red — Cipher Mining, for one, closed the day at over 1% down.
So what
There has been plenty of blame to go around, with more than a few disgruntled investors pointing the finger at Elon Musk’s SpaceX. A report published Thursday afternoon in The Wall Street Journal detailed the company’s finances, revealing that both it and the Musk-led Tesla actively sold out of top-dog crypto Bitcoin in 2021 and 2022. According to the newspaper, SpaceX took a write-down of $373 million in its Bitcoin investments in the latter year alone.
After the article was published, Bitcoin’s price started to fall. As of mid-afternoon Friday, it was down by almost 7%. And very often, where Bitcoin goes, altcoins tend to follow.
Musk is a high-profile and rather assertive proponent of cryptocurrencies in general and the reported sell-off from the two businesses he’s most commonly associated with, then, might have been quite a blow to many crypto investors’ morale.
Others in the market believed the bankruptcy declaration by China’s massive — and massively troubled — real estate giant Evergrande was at least part of the reason for the crypto exodus. There’s something to this, as fallout in the already struggling Chinese economy could impact that country’s appetite for crypto investments, which are considered speculative investments even at the best of times.
Now what
I don’t think either of these factors nor other concerns hanging over the crypto market — chiefly the revelation on Wednesday that Federal Reserve officials aren’t ruling out future interest rate increases — are solely responsible for the Friday sell-off. Rather, it’s more that the wider crypto market is in a nervous mood.
Prices for Bitcoin and many altcoins, in addition to certain crypto companies listed on the stock exchange, have generally improved of late. In a situation like that, particularly when dealing with speculative and volatile investments, it doesn’t take much negative news to send market players to the exits. On Friday, investors some got some bits of negativity; no wonder they reacted with sell-offs.
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Eric Volkman has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin, Tesla, and XRP. The Motley Fool has a disclosure policy.
