What happened
Today, the term “bloodbath” would be a comprehensive description of how the crypto market has evolved. By 2:00 p.m. ET, the crypto market is down 6.3% overall. That move was marked today by a very large underperformance in a number of high-growth altcoins.
We saw relative outperformance (if you can call it that) among tokens with larger market capitalization today. Binance coin (CRYPTO: BNB), the third largest cryptocurrency in the world, fell 5.4% in the last 24 hours at 2:00 p.m. ET. During the same period, the eighth and seventeenth largest tokens, XRP (CRYPTO: XRP) and Chain link (CRYPTO: LINK), decreased by 6.1% and 4.8%, respectively.
The stock, bond and crypto markets all collapsed today after the minutes of yesterday’s Federal Reserve meeting were released, which signaled the need for rate hikes and balance sheet cuts, which could come earlier than expected. Investors in all risk assets have sold in the past 24 hours as concerns about the abandonment of the easy money policy have many questioned the sustainability of capital flows in higher risk assets.
Image source: Getty Images.
so what
Binance Coin, XRP, and Chainlink are three very unique cryptocurrencies that represent blockchain networks that offer unique end-user value. However, these large-cap tokens are also the main beneficiaries of capital-hunting returns over the past year.
The market’s fears that capital could become more expensive in the short term are justified and forward-looking. All tokens are likely to remain under pressure as the market gets into pricing and investors look for quality in this environment.
However, the relative outperformance of these three tokens today suggests that these tokens are among the higher quality cryptocurrencies that investors are looking for.
What now
The crypto market is inherently much more volatile than other major asset classes like stocks and bonds. However, many of the same catalysts for the equity and bond markets have impacted this sector as well. Hence, there is a correlation between these asset classes that investors need to be aware of.
Capital flows are important, and it is an understatement to say that crypto investors have not benefited from the long period of expansionary monetary policy we have seen. If the punch bowl is taken away, the question remains, which assets have the edge in this environment.
For now, investors in many sectors, including cryptocurrencies, appear to be taking a risk-free approach logically and prudently. How long this sale will last is unclear. However, the relative outperformance of these three tokens is not lost for many investors looking for quality and value.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all reflect critically about investing and make decisions that will help us get smarter, happier, and richer.
