The cryptocurrency market had another bad end to the week on Friday, selling off into what could be a wild weekend. Yuga Labs will be minting some form of land for its metaverse and that’s driving a lot of interest in ApeCoin and the underlying Ethereum (ETH -0.10%) blockchain. But that didn’t help values today.
As of 3:10 p.m. ET, Bitcoin (BTC -0.21%) had fallen 4.1% in the last 24 hours, Ethereum was down 5.4%, and Coinbase Global (COIN -8.13%) had fallen 5.9%.
The biggest macro news is that the stock market overall is down as investors sell risky assets. At the close of trading, the S&P 500 had fallen 3.6% for the day and the Nasdaq Composite is off 4.2%. Over the last six months, cryptocurrencies have been highly correlated with the stock market and that’s holding true today as well. I do think it’s interesting that crypto assets aren’t falling much more than the market overall, which is a small sign that crypto is becoming more resilient.
There are some broad concerns in the market that could end up spilling over to the cryptocurrency ecosystem. One is that U.S. gross domestic product declined 1.4% in the first quarter of 2022, based on initial readings, which could mean the economy is already in a recession. With inflation on the rise and prices going up faster than wages, there may be a sell-off in nonessential assets, like cryptocurrencies.
Coinbase shares probably shouldn’t be correlated with crypto prices because it generates fees on transactions, not prices, but it’s common that even when values are down Coinbase will fall. That’s one reason this stock is down today.
As painful as these down days can be, they’re a healthy part of the market in cryptocurrencies. Asset prices are moving more in line with the market overall rather than seeing wild swings on pure speculation.
Every day, there’s more and more built in the crypto economy and that should be good news for the market. I think long-term there will be continued growth in non-fungible tokens (NFTs), decentralized finance, and other digital products, and Bitcoin, Ethereum, and especially Coinbase will play a role in that growth.
The market overall is going through a correction and the selling seems to get worse by the day. But long-term there’s a lot to like about the crypto industry and the innovations being built and money being invested by retail investors and venture capitalists. In time, the market will recover but right now fear has taken over and investors are selling everything that seems to be risky at the moment.