Why did altcoins fall this week?

Cryptocurrencies have been trending over the past few months on the back of hope that the Trump administration will ease regulations on the industry and give clarity to developers and blockchain entrepreneurs. This has sent prices soaring, but it has also brought a lot of speculation and FOMO to the cryptocurrency market. Some of that was reversed this week as the value of all major coins, including altcoins, declined significantly.

According to the data he provided Standard & Poor’s Global Market Intelligence, Dotted (a point 3.21%) It is down 21.6% over the past week as of 1:30 PM ET on Friday, Avalanche (fax -0.05%) Stopped at 23.3% Internet computer (ICP 2.22%) decreased by 22%, and Close to the protocol (close 2.13%) Stopped by 24.2%. As we approach a two-week period of likely low trading volume, this could be just the beginning of market volatility.

Fed cut

The biggest driver of this week’s moves was the Federal Reserve, which cut interest rates by a quarter point on Wednesday. But that was met with skepticism by investors who pushed up long-term interest rates. Long-term rates drive the valuation of growth stocks and speculative assets such as cryptocurrencies, which is why values ​​fell this week. Ironically, cryptocurrencies still move in a way associated with growth stocks, rather than as a hedge against the market or inflation.

What the market saw as worrying in the Fed’s statement was expectations of higher inflation and higher unemployment in 2025, which could indicate a weak economy. Cryptocurrency values ​​have risen due to excess liquidity in the market and investors who are optimistic about the future of the economy, so a reversal in this sentiment will punish cryptocurrencies, even more than stocks.

The future of blockchain

What investors need to see is more utility and innovation in blockchain which will ultimately increase demand and value for these altcoins. The whole purpose of building a low-cost Blockchain with smart contracts, decentralized finance, and other utilitarian features is to be able to generate value for the entire ecosystem. There have been developments on this front over the past three years, but there is still more to be done and not every blockchain will benefit equally.

The speculation that has driven values ​​over the past couple of months will no longer be the primary driver, and if the hype wanes, valuations may fade as well.

There is still a need for a long view in the field of cryptography

There are still a lot of potential tailwinds for cryptocurrencies, but they may take some time to appear. I believe that clarity in regulations could allow for more innovation in the blockchain space and this could create significant value. There is also the possibility of listing more digital assets such as exchange-traded funds (ETFs) or on centralized exchanges.

I believe the future is still bright for the cryptocurrency industry, but the past few weeks of bullish moves may not have been sustainable. A lot of money has flowed into the industry in the hope that regulatory changes will increase value, but any real impact may be months or years away. A pullback is normal and with trading volume likely to be light over the holidays, volatility will be the norm for altcoins as well.