Investors dump altcoins as crypto rally stalls

by Arthur · April 20, 2023

contracts on the Cboe Global Markets exchange (formerly referred to as CBOE Holdings, Inc.) on December 19, 2017 in Chicago, Illinois. Last week, the exchange became the first in the United States to start trading Bitcoin futures. Bitcoin prices have risen over the past year, going from $1,000 per coin at the start of the year to a recent peak of around $20,000. (Photo: Scott Olson/Getty Images)

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Cryptocurrency prices extended their fall to 7% for the week, with declines across the board but concentrated in tokens other than market leaders bitcoin and ether, as investors appear to be adopting risk-off strategies.

BitcoinBTC and ether now make up 63% of the total $1.24 trillion cryptocurrency market, up from 55.8% at the end of last year. This week’s pullback comes after the market recovered from a low of around $828 billion at the end of 2022, a year of widespread bankruptcies and other disruptions to digital assets.

Risk-off sentiment was evident in the bond market on Thursday, with the yield on the 10-year Treasury bond falling 6 basis points to 3.55%. Investors appear to be reacting to the possibility that the US will default on its debt as the White House and White House Republicans battle to raise the borrowing limit. The US reached its statutory limit of $31.4 trillion in January, but the Treasury has been able to stave off a crisis with reductions in emergency spending.

Ironically, buyers are flocking to the very bonds that would default, accepting increasingly lower yields as the situation plays out in Washington. However, Treasuries often find favor in troubled markets. Short-term yields are higher, as much as 5.06% for three-month Treasuries, an unusual situation compared to bonds with longer maturities that could lead to a recession.

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While the broad stock market averages were only fractionally lower, cryptomining stocks took a hit. CleanSpark, a sustainable bitcoin miner, leads the pack down 10.7%. Riot Platforms, Bitfarms and Marathon Digital were all down more than 8% lower, giving back some of the 40% gain the sector saw last week after investor sentiment in the digital asset sector turned positive.

Microstrategy, the business software company with a 140,000 tokens’ stake in bitcoin fell 6.3%, worse than the underlying cryptocurrency itself. Bitcoin itself fell 3.6% to $28,234.55 per coin. The leading cryptocurrency hit a brief peak Tuesday of $30,365 before a steady decline that brought it to a 10-day low.

Ether followed, falling 2% to $1,938.37. Ether had a milder fall than bitcoin as withdrawals of staked crypto locked on the EthereumETH blockchain remained modest at about $1.6 billion out of a total of $38 billion, according to data provider Nansen. Some of these coins had been frozen since December 2020, but were freed as part of recent upgrades to Ethereum.

Ethereum gas fees have also increased in the past week, mainly due to memecoin mining. The average gas fee, a transaction fee paid to the Ethereum network, rose to 81.94 gwei on Wednesday, more than doubling since Monday. A gwei is a fraction of an ether, equal to one billionth of the coin.

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I am a general assignment reporter on the Forbes Digital Assets team where I focus on cryptocurrency, NFTs and blockchain technology. Originally from Peru, I graduated from New York University with a degree in journalism and comparative literature, where I wrote my thesis on non-fungible tokens.