Well, that rally to end 2023 and into early 2024 had to end at some point.
Many of the top cryptocurrencies in the market are reeling today, as risk assets across the board decline on a variety of headwinds. Ethereum (CRYPTO: ETH), Solana (CRYPTO: SOL), and XRP (CRYPTO: XRP) are among the tokens to watch for crypto investors, having declined 6.7%, 9.2%, and 8.4%, respectively, over the past 24 hours at 3 p.m. ET.
A number of macro forces are driving most long-duration assets lower today. A strengthening U.S. dollar, a decline in long bonds (and corresponding surge in yields), and a widespread rotation to more defensive assets has plagued more speculative asset classes such as crypto over the past 24 to 48 hours.
Additionally, these three tokens have their own set of headwinds investors appear to be pricing in today. Let’s dive into what’s driving this move in these three top-10 digital assets right now.
I thought this was a crypto bull market — what gives?
A good portion of the recent rise in crypto assets over the past few months can be attributed to expectations about a spot Bitcoin exchange-traded fund (ETF) approval. Expected by Jan. 10, such an ETF could pave the way for similar products for Ethereum (given there are proposals already underway) and potentially other major tokens such as Solana and XRP to follow.
Accordingly, a narrative shift among many in the crypto market over the past day or so is wreaking havoc on investors relying on this catalyst. Some analysts and experts, such as Matrixport’s Markus Thielen, believe that an ultimate approval for a spot Bitcoin ETF may still be a “long shot.”
This view appears to be spreading, with an increase in bearish bets on top cryptocurrencies driving some of the accelerated downside move today. Additionally, nearly $100 million in bullish perpetual contracts placed on Ethereum have been liquidated over the past 24 hours, as per Coinglass. XRP and Solana are also among the top five crypto tokens in terms of long liquidations today, suggesting leveraged upside bets on these tokens are turning sour.
Fundamentals weakening
In addition to the leveraged derivatives market, another key fundamental factor many investors consider when gauging the health of the crypto market over a specific time frame is total value locked (TVL). TVL generally reflects the amount of capital existing within specific crypto ecosystems. When times are good, capital flows into the crypto sector, and this number rises.
Unfortunately, since the beginning of the year, the total TVL for all crypto projects has dropped 5.8% to $52.49 billion. Ethereum, Solana, and XRP saw similar declines in their TVL values, though these three projects have still seen their cumulative TVL numbers rally nicely off of last year’s lows.
While many still expect that a spot Bitcoin ETF could be approved in short order (partly due to various meetings between Wall Street companies and the SEC in recent days), investors and users appear to be taking a cautious approach with their capital right now.
Bottom line
Overall, the crypto sector, and many of its top tokens, appear to be feeling the effects of uncertainty today. At the end of the day, investing is about assessing probabilities. And up until a couple of days ago, the market seemed to be pretty certain that spot ETFs are coming in short order, leading to risk-on trades across this sector in projects that may follow Bitcoin’s lead.
The expected decision date is now about a week away. Until then, I expect more volatility on the horizon, as additional leaks filter into the overall narrative for this sector.
Should you invest $1,000 in Ethereum right now?
Before you buy stock in Ethereum, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Ethereum wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of December 18, 2023
Chris MacDonald has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Bitcoin, Ethereum, Solana, and XRP. The Motley Fool has a disclosure policy.
Ethereum, Solana, and XRP Are Slumping Today. Here’s Why. was originally published by The Motley Fool
This article was originally published by a finance.yahoo.com . Read the Original article here. .
Disclaimer:The information provided on this website does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the website’s content as such. BitcoinNews.live does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.