There have been numerous remarkable weeks for owning altcoins, but, as with any asset class subject to volatility, there have also been many unfavorable ones. Unfortunately, the past week fell into the latter category, as emerging concerns about the macroeconomy negatively impacted the value of several coins and tokens.
A substantial number of altcoins experienced double-digit declines throughout the week. Data gathered by S&P Global Market Intelligence shows that Toncoin (-6.09%) decreased by 14%, Polygon (0.04%) faced a slightly lesser decline at 13%, while Aptos (-1.17%) outpaced both by plummeting nearly 17%.
Unexpected Downturn
The bulk of the bearish momentum in crypto trading occurred on Friday, triggered by the Bureau of Labor Statistics’ publication of the latest unemployment figures. Although the data wasn’t alarming, it failed to inspire confidence, revealing that employers in the U.S. added 142,000 jobs in August.
This figure was significantly below the economists’ average estimate of 165,000, introducing new concerns for coin and token holders. A tighter labor market theoretically heightens the likelihood of the Federal Reserve (Fed) aggressively lowering its key interest rates, whereas a weaker-than-expected market could prompt more cautious rate cuts.
Before the August employment report, numerous economists and crypto enthusiasts anticipated the Fed would cut rates by 50 basis points. Following the report, speculation has shifted towards a 25 basis-point reduction. If the Fed remains particularly cautious, it might choose, in line with recent patterns, to leave rates unchanged.
Why do crypto investors and speculators care about the Fed’s actions? Interest rates influence the overall level of risk that market participants are willing to undertake. Generally, lower rates make secure investments like government bonds less appealing, thereby increasing the attractiveness of higher-risk assets such as cryptocurrencies.
Opportunities in Decline
With the often-volatile swings in cryptocurrency prices, it’s easy to become anxious when they decrease or overly confident when they rise. This response is amplified when major economic data surprises either positively or negatively.
In these situations, individuals interested in crypto should exercise caution and selectivity. Now may not be the best time to invest in meme coins, for instance. This is because coins and tokens associated with more practical platforms are likely to recover more swiftly when the next rally occurs. From this perspective, Toncoin, Polygon, and Aptos appear promising.
