Why XRP, Cardano, Chainlink, and Crypto.com are down today

What happened

Altcoins had a rough day that started late Monday night and continued through Tuesday. Major cryptocurrencies were the declining leaders, but smaller coins amplified the losses of larger market cap coins in trading on Tuesday.

XRP (CRYPTO: XRP) declined 8.3% in the last 24 hours, Cardano (CRYPTO: ADA) decreased by 7.7%, Chain link (CRYPTO: LINK) fell 12.4%, and Crypto.com coin (CRYPTO: CRO) is down 10.3%, to name a few. There are a few things that could impact trading today.

Image source: Getty Images.

So what

The first notable item is that all cryptocurrencies are down which can lead to a cascading decline in the market. Coinglass.com reports that $ 521 million worth of long crypto transactions were liquidated on 164,115 accounts in the past 24 hours. The sale began on Monday when $ 418.5 million in long positions was liquidated, so the liquidation appears to be picking up steam on Tuesday.

It may not seem important, but when traders borrow money on margin to take a long position (bet that an asset will go up in value) or a short position (bet that an asset will lose value) ), they may be forced to sell immediately if they lose too much money. Brokers and exchanges require that a certain percentage of an account be held in cash or the value of a security, so these positions can be liquidated if there is too much leverage in a portfolio.

The last time cryptocurrencies fell so quickly was on December 2-3, when more than $ 2 billion worth of crypto was liquidated on various exchanges. In the days following that crash, cryptocurrencies stabilized, but today’s sell-off pushed some to prices close to lows of a month ago.

Now what

Given the lack of real news to boost the cryptocurrency market, I would highlight today’s shift to normal volatility. This week the trading volume is generally lower in the market and this can lead to some weird moves. In crypto, there are a lot of traders who have a lot of influence and this can lead to the type of closeouts I pointed out above, triggering a quick sell off.

As the market returns to more normal trading in early 2022, I think it’s important to see more people using crypto as a utility product, whether it’s NFTs or decentralized financial products.

I think the cryptocurrencies that can build the best ecosystems will ultimately be the winners for investors. XRP, Cardano, Chainlink, and Crypto.com are all building their own take on a cryptocurrency ecosystem and that’s why investors have been bullish on them. In the long term, it is these ecosystems, and not the volatility of a few days of trading, that investors need to focus on, which is why today’s big move should be ignored in the long term.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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