Why Binance Coin, Chainlink, and XRP Went Down Today


What happened

Today, the term “bloodbath” would be a broad description of the evolution of the crypto market. Starting at 2 p.m. ET, the cryptography the market as a whole fell 6.3%. This move was shaped by a very large underperformance of a number of high-growth altcoins today.

Among larger cap tokens, we’ve seen relative outperformance (if you can call it that) today. Binance Coin (CRYPTO: BNB), the third largest cryptocurrency in the world, fell 5.4% in the past 24 hours at 2 p.m. ET. During this same period, the eighth and 17th largest chips, XRP (CRYPTO: XRP) and Chain link (CRYPTO: LINK), fell 6.1% and 4.8%, respectively.

The stock, bond and crypto markets all plunged today, following the release of the minutes of the Federal Reserve meeting yesterday, which signaled the need for rate hikes and balance sheet cuts that could occur sooner than expected. Investors in all risk assets have been selling for much of the past 24 hours, as concerns over the elimination of easy money policies cast doubt on the sustainability of capital flows to higher risk assets.

Image source: Getty Images.

So what

Binance Coin, XRP, and Chainlink are three very unique cryptocurrencies, representing blockchain networks that deliver unique value to the end user. However, these large cap tokens are also the main beneficiaries of the returns from the capital raising over the past year.

Market fears that capital may become more expensive in the short term is a valid and prescient question. All tokens are likely to remain under pressure as the market engages in price discovery and investors seek quality in this environment.

That said, the relative outperformance of these three tokens today suggests that these tokens are some of the higher quality cryptocurrencies that investors are looking for.

Now what

The crypto market is inherently much more volatile than other key asset classes such as stocks and bonds. However, many of the same catalysts for the equity and fixed income markets have also had an impact on this sector. Thus, there is a correlation between these asset classes that investors should be aware of.

Capital flows are important, to put it mildly to say that crypto investors haven’t taken advantage of the long period of accommodative monetary policy we’ve seen. As the punch bowl is withdrawn, the question remains as to which assets will come out on top in this environment.

For now, investors appear to be taking a logical and cautious approach across many industries, including cryptocurrencies. The duration of this sale is unclear. However, the relative outperformance of these three tokens is not lost on many investors looking for quality and value.

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Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool owns and recommends Chainlink. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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