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Why XRP, Cardano, Chainlink, and Crypto.com Are Down Big Today

Why XRP, Cardano, Chainlink, and Crypto.com Are Down Big Today
Written by publisher team

What happened

Altcoins had a tough day starting late Monday night and continuing into Tuesday. Major cryptocurrencies were at the forefront of the decline, but smaller coins doubled the losses of larger-cap coins in trading on Tuesday.

XRP (CRYPTO: XRP) down 8.3% in the last 24 hours, Cardano (CRYPTO: NO) decreased by 7.7%, chain link (CRYPTO: link) decreased by 12.4% and Crypto.com currency (CRYPTO: CRO) It’s down 10.3%, to name a few. There are a few things that are likely to affect day trading.

Image source: Getty Images.

so what

The first notable element is the decline of all cryptocurrencies, which could cause a cascading decline across the market. Coinglass.com reports that $521 million worth of long cryptocurrency trades have been liquidated from 164,115 accounts in the last 24 hours. The sell-off began on Monday when $418.5 million of long positions were liquidated, so it looks like the liquidation started accelerating on Tuesday.

This may not seem important, but when traders borrow money on margin to take a long position (betting the asset’s value will go up) or a short position (betting the asset’s value will go down), they can be forced to sell immediately if they lose a lot of money. Brokers and exchanges require that a certain percentage of the account be held in cash or the value of a security, so these positions can be liquidated if there is a lot of leverage in the portfolio.

The last time cryptocurrencies fell so quickly was on December 2 and 3 when over $2 billion worth of cryptocurrencies were liquidated on a variety of exchanges. In the days following that crash, the cryptocurrency stabilized, but today’s selling has pushed some to prices near their lowest levels a month ago.

What now

Since there is no real news to drive the cryptocurrency market, I am going back to today’s move to normal volatility. This week, there is generally less trading volume in the market and that can lead to strange moves. In cryptocurrencies, there is a lot of leverage by many traders and this can lead to the kind of liquidation I highlighted above, which leads to a quick selloff.

With the market returning to normal trading as early as 2022, I think it is important to see more people using cryptocurrency as a utility product, whether it is using NFTs or decentralized finance products.

I believe that cryptocurrencies that can build the best ecosystems will ultimately be winners for investors. XRP, Cardano, Chainlink, and Crypto.com are all building their own ideas on a cryptocurrency ecosystem which is why investors are so optimistic about them. In the long term, it is these ecosystems, not the volatility of a few days of trading, that investors should focus on, which is why today’s big move should be ignored in the long run.

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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