From Decrypt · By Ryan S. Gladwin
In brief
Ethereum, XRP, and Solana have all dropped in value on the day, with "outsized drawdowns" compared to Bitcoin.
Experts point to Wednesday's consumer price index coming in at 3.7% and expectations of an October interest rate hike as major macro pressures.
The slide is also a natural hangover from altcoins’ “strength and momentum” over recent months.
Altcoins have taken a hit over the past 24 hours, with major tokens seeing "outsized drawdowns" compared to Bitcoin. Experts say that this has largely been prompted by macro pressures pushing prices down.
With the market cap of all cryptocurrencies dropping by 2.5% to $2.8 trillion, Ethereum dropped by 5.5% to a $289 billion market cap over the past 24 hours, XRP fell by 5.1% to $82.4 billion, and Solana slipped by 3.8% to $60.6 billion. Meanwhile, industry leader Bitcoin has slipped by 3.1% on the day and 2.6% on the week, sitting at a market cap of $1.6 trillion.
It comes after the consumer price index rose 3.7% in the year to September, as Decrypt reported on Wednesday, with Myriad predictors pointing to a 28% chance of an October interest rate hike (Disclaimer: Myriad is a prediction market operated by Decrypt's parent company Dastan).
Nick Forster, founder of options trading exchange Derive.xyz, said in a note shared with Decrypt that this shifted traders into "protection mode" as "hedging activity" on the platform doubled, and whales pulled back on optimistic bets made in spring.
Myriad: What's the Fed's next move? Click to make your prediction.
"This immediate pull-back from long-term upside bets alongside aggressive short-term hedging shows a dramatic regime shift," he said, "with institutional participants rapidly reassessing their macro risk exposure as the path for interest rates turns murky again."
When markets react like this, Luke Nolan, senior research associate at CoinShares, says that altcoins are impacted the most.
"[It] seems to be high beta assets just got hit harder, similar to in equities as well, where the high flyers have seen outsized drawdowns in recent sessions," Nolan told Decrypt. "Alts are typically more sensitive to financial conditions, and tightening affects the premise of liquidity expanding."
Nolan also highlighted the U.S. dollar hitting a near 18-month high as a downward pressure on the entire crypto market. He said that over a medium-term horizon, crypto tends to have an inverse correlation to the US Dollar Index, or DXY. This is partly due to crypto being priced in dollars, Nolan explained, but also because a rising dollar causes a tightening in liquidity and a fall in risk appetite.
Max Shannon, senior associate at Bitwise Europe, told Decrypt that the slide is also a hangover from altcoins’ “strength and momentum” over recent months.