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Why Cardano, XRP, and Avalanche Tokens Plunged on Friday

Why Cardano, XRP, and Avalanche Tokens Plunged on Friday
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What happened

Black Friday was a red day for the cryptocurrency market in general, with most coins posting a massive sell-off. Cardano (CRYPTO: NO)And ripple (CRYPTO: XRP), And Avalanche‘s (CRYPTO: AVAX) The tokens are down 7%, 9%, and 11%, respectively, over the past 24 hours as of 5:30 PM ET. Bitcoin decreased by about 8% and EthereumThe ether token is down around 9%.

Cryptocurrencies are not the only ones posting a big sell-off lately. In general, investors have been staying away from higher-risk investments, and stocks were hit hard in today’s trading as well. Friday’s sell-off in the cryptocurrency market may be closely related to the emergence of a new strain of COVID-19, but other factors are likely to play a role as well.

Image source: Getty Images.

so what

A new type of coronavirus has been discovered in South Africa, and health officials fear it appears to be highly transmissible and capable of bypassing current vaccines. The news of this new alternative, called Omicron, coincides with a sharp decline in prices for cryptocurrencies and stocks.

the Standard & Poor’s 500 The index ended the day down by about 2.3%, while the index ended the day with a decrease of 2.3% Nasdaq Composite And Dow Jones Industrial Average It fell 2.2% and 2.5%, respectively. Stocks and cryptocurrencies don’t always see high levels of correlates of market movement, but this is the case where premium markets move in tandem.

In addition to the downward pressure caused by concerns about the new COVID boom, the valuations of many cryptocurrencies have plummeted amid recent regulatory developments and the perception of increased risks for future crackdowns. China declared all cryptocurrency transactions illegal in late September, after which it continued to crack down on miners and others deemed to be violating its policies on digital tokens.

The infrastructure spending bill recently signed by President Biden created new rules for crypto brokers, and it’s not unreasonable to think that additional local regulations and taxes could be in the works. Recently, India introduced legislation effectively banning all private cryptocurrencies, which leads to additional selling.

Despite the recent sell-off, the AVAX avalanche token has only fallen by 3% over the past seven trading days. The cryptocurrency has been making some big gains after news that consulting giant Deloitte is building a new disaster relief management program on top of the Avalanche blockchain, but its price has fallen in response to broader market trends.

Without a significant positive pricing catalyst recently, Ripple’s XRP token has been caught in the bearish momentum affecting the broader cryptocurrency market and has fallen by nearly 12.5% ​​over the past seven days. Ripple is currently in a lawsuit with the Securities and Exchange Commission over whether its XRP token should be classified as a security. The lawsuit is expected to expire next year, and CEO Brad Garlinghouse recently indicated that some positive progress has been made in the case, but the regulatory implications remain a concern.

Cardano has seen a particularly sharp drop during the last week of trading, with the token price dropping nearly 15% across this stretch. Trading platform provider eToro announced on November 23 that it will limit the trading of ADA tokens from Cardano and you can seeTRX’s TRX token due to “business considerations in an evolving regulatory environment.”

What now

Price volatility is the norm in the crypto space, and it’s helpful to put the recent moves in context. Even with the recent big sell-off, Cardano, Ripple, and Avalanche tokens all posted significant gains during the 2021 trading.

avalanche price chart

Avalanche price data by YCharts

Cryptocurrency pricing trends tend to be very cyclical, but investors should proceed with the understanding that it is difficult to identify transitions from bearish to bullish momentum, and vice versa, with a high level of accuracy.

The cryptocurrency market is likely to continue to be highly volatile in the near term. Investors may want to treat the sell-off as an opportunity to build positions in the top cryptocurrencies, and Cardano, Ripple, and Avalanche tokens could make more of their massive gains, but it’s worth noting that they remain a high-risk investment.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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