Action was lively on the cryptocurrency market, but that wasn’t necessarily good news.
A gloomy stock market and news — well, vibrant speculation — of a pending sell-off by a major corporate cryptocurrency holder put the hurt on altcoins Wednesday.
A nervous market traded out of many of the better-known coins and tokens in that universe. Among the many decliners was Avalanche (AVAX -4.08%), which was off by almost 4% over the past 24 hours in late afternoon trading. Aptos (APT -4.68%) was also down by a similar percentage, while Chainlink (LINK -7.22%) had it worse with an almost 6% slide.
A big sell-off and a big potential seller
As much as some crypto-heads might wish it to be so, cryptocurrencies do not trade in their own special investment bubble. As a group, they can also be very much affected by how other clusters of assets do on a given day.
We saw this illustrated starkly on Wednesday, with the decline of a great many equities, even blue chips. That classic benchmark for stocks, the S&P 500 index, sagged by nearly 1% — a notable drop by many standards. If the market isn’t enthusiastic about old-style investments like stocks, dollars to donuts it won’t be hyped about far more speculative plays like cryptocurrencies.
Will that share slump last? Perhaps not, as one of the so-called “Magnificent Seven” stocks posted an encouraging earnings beat. This was no less a company than electric vehicle (EV) king Tesla, which unveiled its third-quarter results after the close of the U.S. stock markets that day.
Interestingly Tesla, helmed by diehard crypto advocate and investor Elon Musk, was one reason the altcoin market was down earlier on Hump Day.
Crypto media outlets reported that Tesla moved almost all of its almost $780 million worth of Bitcoin to new digital wallets last week. This redistribution has found its way into multiple wallets, per the reporting, with the largest ones containing anywhere from $121 million to $142 million. This has led to speculation that the company is preparing to unload at least a few chunks of its Bitcoin hoard.
Watch that sentiment
Rumors fly constantly on the crypto market, and we, as investors, should never trade purely on them. What’s more concrete is that dip in U.S. equities trading, and that’s the situation to monitor more closely (although Tesla, as a Bitcoin investor, can certainly move the prices of assets throughout the cryptoverse if it proves to be a seller).
If the general sentiment on investible securities continues to be negative — even after Tesla’s sprightly third-quarter performance — we’ll surely be in for more declines in the altcoin space. Personally, I don’t think it will, as there is still much to be bullish about with stocks. So perhaps this provides some opportunity for bargain-seekers to snap up selected altcoins at a discount.
Eric Volkman has positions in Bitcoin. The Motley Fool has positions in and recommends Aptos, Avalanche, Bitcoin, Chainlink, and Tesla. The Motley Fool has a disclosure policy.
