What happened
Volatility in the crypto market has continued to take bearish form today. Leading cryptocurrencies Bitcoin (CRYPTO:BTC), Ethereum (CRYPTO:ETH), and Polygon (CRYPTO:MATIC) all saw significant drops in early trading today. As of 1:30 p.m. ET, Bitcoin and Ethereum both traded slightly more than 4% lower, with Polygon down around 8.5% over the past 24 hours.
It appears much of this move is a continuation of what we’ve seen this week in terms of price action across most major cryptocurrencies. Among the most prominent bearish catalysts is the move earlier this week from Chinese regulators to clamp down harder on Bitcoin mining. As a cryptocurrency that’s often used as a benchmark for the valuations of the sector, this Bitcoin-related news had ripple effects for most large-cap crypto tokens.
Image source: Getty Images.
So what
Given the fact that these three cryptocurrencies combined make up more than half the market capitalization of the entire crypto world, investors pay attention to these kinds of moves. Additionally, the fact that this bearish momentum has continued for several trading days now suggests a more protracted move could be underway.
While risk assets remain red-hot right now, some investors are growing concerned with the pace of valuation expansion across various asset classes. Cryptocurrencies happen to be difficult to intrinsically value. Accordingly, negative headlines appear to be driving token prices down, as investors increasingly focus on the risks associated with this sector, rather than its growth potential.
Now what
Bitcoin, Ethereum, and Polygon are three blockchain networks creating a tremendous amount of utility right now. For long-term investors in the crypto space, there’s a lot to like about the long-term potential of these blockchains in terms of disruption and innovation moving forward.
However, there’s also something to be said about the risk and volatility associated with the cryptocurrency space as a whole. Investors putting any sort of meaningful capital into this sector ought to be aware of the downside risks. Investors have seen the high-reward aspect of many cryptocurrencies in recent months. However, this week’s price action is the latest reminder that these digital assets are extremely volatile, and therefore high-risk in nature.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
This news is republished from another source. You can check the original article here
Be the first to comment