Some crypto prices have been retracing recently after having made significant gains after the course of the last month, and some people believe have been frightened by these recent developments. The weaker move, however, is nothing to be concerned about – particularly for those who are long term investors.
The weaker move is a completely normal retracement
The first thing to note is that the bitcoin price has appreciated significantly over the course of the last month, and such retracements are nothing to be concerned about.
In fact, these retracement are completely healthy, since they ensure that new price floor are put into place and make sure that the market doesn’t become too overly leveraged as the price is appreciating.
It is also worth noting that this retracement hasn’t been unilateral across the market, and many projects have been making significant gains. For example FTM, the native currency of the Fantom blockchain, has now appreciated by over 100% over the course of the last 30 days.
Institutions are allocating far more to Bitcoin than to altcoins
One of the main reasons why altcoins haven’t fared as well as bitcoin (as demonstrated by the bitcoin dominance) is the fact that institutions are far more interested in accumulating bitcoin than they are in accumulating altcoins.
One of the main reasons for this is the fact that bitcoin is largely recognised as decentralised enough to be considered a commodity that has no insiders.
Countries such as El Salvador have made this distinction clear by writing it into law, wheresa in the US Gary Gensler has made similar statements, but no such laws have been made – this frightens investors, since it means that they may be investing in securities without appropriate disclosures and accountability, and there is a far higher degree of uncertainty – for example, ETH holders still can’t be completely certain when they will be able to retrieve their staked ETH.
A further rate hike is still expected, which will harm weaker altcoins most
Finally, despite many analysts taking rather optimistic views that interest rates can’t rise much further, the Federal Reserve has been clear that they remain fully intent on continuing to raise interest rates moving forward.
The further rate hike could means that cryptocurrency prices, as risk-on assets, would suffer a lot of damage. This damage will be felt the hardest in the altcoin space, which is the riskiest and least-compliant area of the cryptocurrency industry.
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