Just when it looked like the cryptocurrency market was bottoming out, the value of some of the most well-known tokens on the market fell again on Wednesday. There was no shocking news, but instability and potential big sellers in the market led to the decline.
Solana was the most notable, down 6,8% as of 13:20 p.m. ET. The token briefly dipped below $10 and is now down 16,6% over the past week. Dogecoin is down 3% in the last 24 hours and The Sandbox is down 4,6%.
What happened?
The news from FTX keeps coming, including today that Sam Bankman-Fried borrowed money from Alameda Research to buy Robinhood Markets stock. It is one of the most valuable collateral in FTX's bankruptcy proceedings and there will likely be a fight over the 7,6% stake in the online broker.
Funds in Alameda wallets are also starting to move, according to data from the chain. Bankman-Fried was released on $250 million bail just days ago, and now the wallets he once controlled are moving the funds. Solana may be down because Alameda is a major holder of the token and investors often anticipate a sale before it actually takes place.
It's a bypass cryptocurrency, but Bitcoin miner Argo Blockchain will also avoid bankruptcy after getting a $100 million bailout. If a Bitcoin company needs a bailout, even the smallest tokens and blockchains can find themselves in trouble. Which, on the other hand, does not happen for secure trading platforms such as Bitcoin system.
The sale of Dogecoin and The Sandbox is likely related to stronger blockchains and ecosystems running into problems. Investors are fleeing to safety right now, and while there aren't many safe places in cryptocurrencies, an underused metaverse and meme coin probably aren't the safest places for your money.
What could happen now?
Not only are cryptocurrencies going through incredible volatility right now, but volume is also down and the number of buyers is dwindling. This can lead to rapid price drops on seemingly insignificant news.
The narrative for all three of these cryptocurrencies is also getting worse. Many investors think that Solana is a dying blockchain (despite having multiplied transactions compared to larger market cap cryptocurrencies), the meme theme is dying in the market, and metaverses like The Sandbox are addressing very real issues right now.
Investors buying cryptocurrencies right now should evaluate the long-term viability of the blockchain or token. I still think Solana will be a valuable blockchain because it can complete thousands of transactions per second, but that doesn't mean the token will recover anytime soon. Dogecoin was created as a joke and has become a meme, but it's not something that will create long-term utility. The Sandbox is another example of an idea that made a splash in 2021, but seems to have lost all momentum in the last year.
I am slowly buying cryptocurrencies with real utility, but with the aim of holding them for years. This bear market will likely last for a while, and it could be a long time before investors see more mature use cases for cryptocurrencies emerge into the mainstream.
