Cryptocurrencies were having a hard day on Sunday after a healthy recovery last week. But with cryptocurrencies, we’ve seen recently that the momentum won’t last.
Starting 4:00 pm ET, Bitcoin (CRYPTO: BTC) dropped 3.5% in the last 24 hours, Ethereum (CRYPTO: ETH) has fallen by 4%, and Dogecoin (CRYPTO: DOGE) dropped to 3.8%. But in the past week, both cryptocurrencies have risen 7.4%, 8.7%, and flat, respectively.
E what now
More pain was reported in the crypto lending space as exchange Blockchain.com reportedly faced a $ 270 million loss on loans to Three Arrows Capital. Collateral damage and web loans in the crypto space were revealed after Three Arrows Capital filed for bankruptcy in the US and began to be liquidated.
The good news is that Celsius continues to unwind in its complex positions. Over the weekend, it reportedly paid $ 258 million to Aave and Compound to free up $ 950 million in collateral. If Celsius can unwind its positions and get collateral, we can see that it pays off customer funds when they want to withdraw. The problem is that the return of collateral can also mean the sale of crypto assets, dumping more on the market at a time when buyers are few.
Bitcoin may also rise after Binance announced on Friday the ability to trade that currency for free. Trading volume increased as a result, which weakened once the initial joy was gone.
Weekends can be volatile for cryptocurrencies as volumes drop and any news can move the market very quickly. With all the crypto liquidations today, we are likely to see more selling pressure in the coming weeks as large leveraged positions are not measurable. But that’s not what will drive up the long -term price of cryptocurrencies.
I think it’s worth taking a step back to think about what was built using cryptocurrencies and the blockchain as a base. There are now thousands of developers building businesses backed by billions of dollars of capital and we are just beginning to see results from that investment. Over the next few years, we will likely see many types of transactions move to the blockchain and businesses will start to generate more use cases over time.
I’m confident in this building happening, but given the proliferation of trading in cryptocurrencies over the past year, it’s not surprising to see a pullback. Traders who have lost money exit the market and leveraged positions are eliminated. That will take time, but in the long run we need to remember that a lot of value is being built and that will be great for investors who are buying and holding.
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Travis Hoium has positions at Ethereum. Motley Fool has positions on and recommends Bitcoin and Ethereum. Motley Fool has a disclosure policy.
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