The cryptocurrency market was on fire Monday morning, and the value of some coins and tokens linked to NFT projects was falling.
Related to the Bored Ape Yacht Club ApeCoin (CRYPTO: APE) was up 23.5% in the past 24 hours as of 11:00 a.m. ET, the STAGE the token increased by 26%, Theta network (CRYPTO: THETA) jumped 9.2% and Dogecoin (CRYPT: DOGE) was up 5.6%. This follows a week of terrible performance for cryptocurrency in general and altcoins and smaller tokens in particular.
Over the weekend, there were fears that the collapse of the Celsius Network and Three Arrows Capital could lead to contagion, or a cascading number of failures, in the crypto market. Values fell across the board and there were even major liquidations. But there does not appear to have been a worst-case scenario and buyers again prevailed over sellers from Sunday afternoon.
Another risk may have been avoided when Solend reversed the use of emergency powers that could have caused up to $100 million in damages. Solana tokens for sale when liquidating the position of a large borrower.
The reality today is that cryptocurrency price movements are driven by short-term trading and over the past few weeks the trading environment has been terrible. Leverage led to rapid liquidations, which led to more risk being exposed in the system and ultimately more liquidations. Ethereum briefly fell below $1,000 and Bitcoin fell below $20,000 over the weekend, levels that seemed unlikely just six months ago.
A number of risks may have come to light in the cryptocurrency market over the past few weeks, but I wouldn’t be surprised to see more emerge in the coming months. Funds that have been launched over the past few years have used leverage to create large positions and these are only discovered by the broader cryptocurrency market when they begin to liquidate.
For tokens linked to NFT projects, the volatility will be even more pronounced. These projects need to be executed on multi-year plans to build things like the metaverse or a larger ecosystem. Cryptocurrencies and blockchain ledgers are essential components of many next-gen technologies, but it’s still early days. Many different tokens are vying for position as app developers and virtual world builders select the right tools for their upcoming products and services. As these projects are built, the tokens vying for developer attention can be extremely volatile.
While I think the long-term future is bright for the cryptocurrency market, I’m focusing on major cryptocurrencies with smart contracts that developers can leverage right now. Speculating on specific projects is just that, speculation. While the value of some of these tokens and coins may increase today, the trend could easily reverse tomorrow. In a falling market, buying quality is a great idea and that’s what I’m doing right now, which doesn’t include STEPN, ApeCoin or Dogecoin.
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Travis Hoium has positions in Ethereum and Solana. The Motley Fool has positions and recommends Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.