© Contributed by The Motley Fool Why Altcoins Are in Crypto Winter Todaywhat's happened
Cryptocurrency winter suddenly thawed on Friday evening, when the number of tokens in the sector skyrocketed. I have already highlighted some of the major cryptocurrencies that are on the move, but some notable altcoins are also emerging. And there may be a good reason for this.
Polkadot ( CRYPTO :DOT) is up 15.7% in the last 24 hours as of 5:00 pm ET, NEAR (CRYPTO:NEAR) protocol is up 21.1% and Tezos (CRYPTO:XTZ) is up 13 ,four%.
So
Recently, it is impossible not to notice the macro market environment in cryptocurrency trading. Inflation data this week showed US prices actually fell on a monthly basis in December, leading investors to believe the rate hike could be completed sooner than expected. Stocks are rising, as are riskier assets like cryptocurrencies.
On a more fundamental level, the US House of Representatives announced the creation of a Subcommittee on Digital Assets, Fintech and Inclusion, which will report to the House Financial Services Committee. Lawmakers have been talking about more regulation of cryptocurrencies, and this is an early sign that the new Republican leadership may be serious.
The regulatory leadership has been greeted with applause from crypto traders over the past year, but it hasn't mattered much. I think altcoins like Polkadot, NEAT and Tezos — with a blockchain designed primarily for building structures — would be in a great position if there was more regulatory certainty.
In terms of trading, the cryptocurrency is in a relatively low volume environment, which means that there is not much liquidity (buyers and sellers). When the value began to rise, it triggered a rally that shocked the market and led to the liquidation of short positions. In the last 24 hours alone, $624 million worth of cryptocurrencies have been liquidated between tokens and altcoins. This short squeeze is fueling the crypto rally.
and now
Cryptocurrencies are still very unstable and risky, but developers continue to generate genuine interest in the blockchain. In the long term, new companies and payment solutions should raise the prices of cryptocurrencies, but this does not mean that the path will be smooth.
I think yesterday's rise was due to the recovery in sentiment after the FTX crash. When FTX went bankrupt, it became clear that billions of dollars worth of assets would need to be liquidated or sold, which would lower the price of the cryptocurrency. Traders hesitated, but this week it was reported that $5 billion in cash and crypto was returned, some of which came from selling leveraged positions. When the surplus of sales ends, buyers can leave.
The market may continue to rise, it may be sold off, but there seems to be a change in sentiment in the equity and crypto markets. Raising interest rates slowly can be beneficial, and it is clear that many of the levers are already leaving the ecosystem. But it will be an unstable race, even if the future is bright.
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Travis Hoyum has no positions in any of the stocks mentioned. The Motley Fool is not interested in any of the promotions mentioned. Motley Fool has a disclosure policy.