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Why Altcoins Were Tanking This Week

The Motley FoolFeb 8, 2025 1:24 PM

What goes up must inevitably come down, as we investors know far too well. The crypto market has been one of those big asset clusters resolutely obeying gravity over the past few days, with many coins and tokens booking losses in excess of 20% and even 30%. These are not the best times for digital money.

The rout didn't spare many cryptos. According to data compiled by S&P Global Market Intelligence, high-profile meme token Shiba Inu was a dog of an investment with a nearly 21% decline across the week. Doing even worse were Bitcoin hard fork Bitcoin Cash and utility token Chainlink, with respective 26% and 27% falls. Worse still was Avalanche's 30% sag.

Winter blues

At the end of last year and the beginning of this one, cryptocurrencies benefited from a set of positive factors supporting their value. A major one was the electoral success of the ticket of Donald Trump and crypto investor JD Vance, which implied a new dawn for the asset class. Interest rates were getting the chop, too, and the skinnier numbers were a boon to riskier investments like digital coins and tokens.

That rapidly gushing stream of good news has dried up since then. Trump's support for the cryptoverse was expressed in the President effectively issuing his own token, Trump Official, and First Lady Melania Trump getting in on the act with her Official Melania Meme.

To some investors, that surely feels like an opportunistic play at personal enrichment rather than a supportive measure for the wider industry. The distaste is lingering and affecting altcoins.

Meanwhile, macroeconomic news isn't bending in favor of cryptos either. Yes, the economy continues to grow, but recent indicative data hasn't necessarily been encouraging. On Friday, the United States Department of Labor released its latest employment figures, divulging that employers added 143,000 jobs. That was simultaneously under the average economist estimate and well below the November and December "adds."

Catalysts wanted

Although a slowing economy dangles the promise of interest rate cuts, Federal Reserve (Fed) officials and some economists generally don't seem hot on the idea. Some have said that 2025 might see only limited reductions or none at all. So, what we've got here is not only a lack of tailwinds pushing cryptos higher but also factors actually pushing down their prices.

This comes after several hot rallies that have left certain coins and tokens richly valued. The market is now very thirsty for good and encouraging news about this asset class, and it hopes some will soon come from the political or economic realms.

Reviewed byTony
Disclaimer: For information purposes only. Past performance is not indicative of future results.

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