For some cryptocurrencies, Sunday's crash isn't over yet.
Last Sunday night, cryptocurrencies crashed in a harbinger of what was to come on Wall Street on Monday. Bitcoin (BTC 2.47%) While it has recovered most of its losses, not all cryptocurrencies have recovered.
According to data from S&P Global Market Intelligence, Ethereum (ETH 1.16%) As of 11 a.m. ET on Friday, it was down 16.9% over the past week. iShares Ethereum Trust ETF (Eta -1.72%) An increase of 14.3% Lido Staked Ether (Steth 1.14%) 12.6% increase. Outside the Ethereum family, polygon (Matic 1.65%) It fell 9.1% NEAR Protocol (near 6.78%) It's a decrease of 13.8%.
It all started with a panic
On Sunday night, 24/7 cryptocurrency trading became the first area to suffer in so-called yen carry trades, which involve borrowing yen at low interest rates and exchanging it for other currencies with higher interest rates.
As the value of the yen soared, this trade suddenly became extremely unprofitable, and investors had to rush to sell their positions, everything from bonds to stocks to cryptocurrencies. A downward spiral began in the cryptocurrency market.
However, the reversal ended relatively quickly as investors bought back many of the stocks as the week progressed. While Bitcoin recovered, smaller cryptocurrencies such as Ethereum did not.
Ethereum ETF Issues
Part of the pressure on Ethereum is related to outflows from Ethereum ETFs, which have seen net outflows totaling $24 million since July 24, 2024.
One of the hopes for cryptocurrencies in 2024 is that a proliferation of ETFs will bring even more money into the industry, which has happened with Bitcoin, but it doesn't seem likely for less popular tokens.
Tokens like Polygon and NEAR Protocol were also arguably hurt by the disappointing performance of the Ethereum ETF, which was supposed to lead to more altcoin ETFs in the future.
New gambling tokens gain attention
Altcoins such as Polygon and NEAR Protocol have also been hit by the over $2 million sale of new blockchain gambling token Rollblock, with the sale of the buzzy new cryptocurrency likely drawing some liquidity from other alternative tokens.
As utility shifts to the new token, the demand and value of the native token may decrease. Over time, the native token may become worthless.
Take a small step
But there are some positive developments in crypto: The NEAR Protocol announced new cross-chain signatures, which will allow NEAR users to own other tokens without having to move them cross-chain, spend funds on gas, or use multiple wallets. This could increase the utility and viability of blockchain as a space for innovation.
At the same time, the policy environment in Washington appears to be becoming more crypto-friendly: The White House met with crypto leaders this week, an ETF was approved this year, and cryptocurrencies appear to be winning court cases. All of this adds up to a brighter future for cryptocurrencies, even if they lost value this week.
Travis Hoium has invested in Ethereum. The Motley Fool has invested in and recommends Bitcoin, Ethereum, Near Protocol, and Polygon. The Motley Fool has a disclosure policy.
