news Why some altcoins and DeFi tokens crashed the most as Bitcoin price corrects

[kyoukage01 3181]

Spoiler

Why XRP, DeFi tokens crashed the most vs. BTC as Bitcoin price corrects

Joseph Young

 

As Bitcoin dropped below $18,000, major altcoins including XRP and DeFi tokens fell by 10% to 30%.

 

The price of several big-name alternative cryptocurrencies fell especially hard following a Bitcoin pullback to $17,650 on Dec. 9. Namely, XRP and top decentralized finance (DeFi) tokens YFI and AAVE dropped by as much as 10% to 20% in the past 18 hours, with Bitcoin (BTC) losing up to 7%.

 

The two main reasons behind the short-term correction of altcoins are likely the current high level of uncertainty among traders and low overall volume.

Bitcoin price at a crossroads: Bad news for alts

Altcoins often reflect the price trend of Bitcoin, with steeper price movements to both the upside and downside. As such, when BTC price moves up, altcoins tend to see even larger rallies.

 

For instance, Cointelegraph reported that XRP surged 91% in a single month when Bitcoin began to rally toward its all-time high on Nov. 23. The bullish market sentiment around BTC caused large-market-cap altcoins, including XRP and Stellar Lumens (XLM), to spike significantly.

 

However, when Bitcoin begins to pull back or there is uncertainty in the market, altcoins often see sharp corrections.

 

In the last 24 hours, as an example, Bitcoin dropped by around 7% from the day’s peak to the lowest point. In contrast, XRP plunged by 15% in the same period, recording a substantially larger price drop compared with BTC.

 

Altcoins see intense corrections because of their relatively lower volume. Bitcoin remains the most liquid cryptocurrency in the market by a large margin. On Binance, the BTC/USDT pair has a $1.5 billion daily volume as of Dec. 9. Ether (ETH) and XRP, in comparison, have daily trading volumes of $600 million and $433 million, respectively.

 

Hence, cryptocurrencies with lower volumes face way more downside risk in the short term when BTC is dropping.

Could altcoins begin to recover soon?

Altcoins could begin to recover in the near term if Bitcoin starts to rally convincingly. There are some signs that BTC could lead the altcoin market to a strong recovery in the near term.

 

Scott Melker, a cryptocurrency trader, said that the latest 4-hour Bitcoin candle had more buying volume than “any of the red candles on the way down.” If the aggressive dip-buying continues, the probability of an altcoin rally increases.

 

Another catalyst for an altcoin market recovery could be the ongoing short squeeze in the Bitcoin futures market.

 

Rafael Schultze-Kraft, chief technical officer at Glassnode, noted that daily long liquidations on Binance crossed $130 million. Consequently, the price fell, resulting in a long squeeze. He said:

“Think I might just start buying the dip when daily liquidations of long positions on #Binance cross $130 million. Seems like a viable strategy to accumulate $BTC at a discount.”

Considering that a major long squeeze caused BTC to drop, a short squeeze in the near future is possible, with $18,600 being a short-term resistance level.

 

Still, one concerning metric to consider in the near term for altcoins is the Bitcoin dominance index. After initially dipping in late November, the index has started to recover slightly, which may spell bad news for altcoins like XRP and XLM in the short term.

source: https://cointelegraph.com/news/why-xrp-defi-tokens-crashed-the-most-vs-btc-as-bitcoin-price-corrects

 

Most cryptocurrency users know that altcoins can have such close tie-ins with Bitcoin's volatile price movements most of the time. It should therefore come as no surprise that when Bitcoin undergoes a price correction, the DeFi tokens will follow suit as well.

 

And as the news above indicates, the DeFi tokens' corrections are displaying huge numbers in %. Some altcoins like XRP also suffers.

 

Buying DeFi tokens will be risky at this point. Well, the DeFi craze may have been already dying down now anyway, so unless something happens that will prove to hugely benefit DeFi, then investing too much on DeFi should be proceeded on with caution.

 

But still, the cryptocurrency market is indicating greed as of today, so we won't be seeing DeFi tokens suffering from a very, very steep drop at least for a few more days or weeks.

 

Edited December 12, 2020 by kyoukage01

[Raqeebzy 6456]

On 12/12/2020 at 5:03 AM, kyoukage01 said:

Buying DeFi tokens will be risky at this point. Well, the DeFi craze may have been already dying down now anyway, so unless something happens that will prove to hugely benefit DeFi, then investing too much on DeFi should be proceeded on with caution.

I agree DeFi tokens investment must be made with extra precautions even before now. But I can tell you DeFi craze is very far from over irrespective of how bitcoin behaves. 

Most DeFi tokens are ERC 20  based. ETH 2.0 will have a good say directly or indirectly on resurgence of DeFi craze and we all should be prepared.

[kyoukage01 3181]

7 hours ago, Raqeebzy said:

But I can tell you DeFi craze is very far from over irrespective of how bitcoin behaves.

I was expecting DeFi to make the full transition from being just a fad to being something that is treated seriously. Not something like yesterday's news that becomes forgotten. After looking at the price chart of some DeFi tokens like YFI, it looks like at least some DeFi tokens are on the road to becoming that.

 

And I was expecting something major to happen with the release of ETH 2.0 but "almost" nothing seems to have happened to its price chart. Maybe ETH is now in a situation with BTC just after halving where it takes a few months for a bullrun to arrive. And if ETH suddenly have a price change in the future, the DeFi tokens may be sure to follow.

 

[Raqeebzy 6456]

On 12/14/2020 at 3:35 AM, kyoukage01 said:

I was expecting DeFi to make the full transition from being just a fad to being something that is treated seriously. Not something like yesterday's news that becomes forgotten. After looking at the price chart of some DeFi tokens like YFI, it looks like at least some DeFi tokens are on the road to becoming that.

 

And I was expecting something major to happen with the release of ETH 2.0 but "almost" nothing seems to have happened to its price chart. Maybe ETH is now in a situation with BTC just after halving where it takes a few months for a bullrun to arrive. And if ETH suddenly have a price change in the future, the DeFi tokens may be sure to follow.

 

DeFi is here to stay. The earlier we realises this, the better for investment opportunities. We can see some positives in solid DeFi projects like LINK for a perfect example. I believe that and we'll see as time goes on.

Just as important cryptocurrency events doesn't have immediate impacts, like the halving process of BTC, ETH 2.0 launching effect too on the whole market will follow suit and with time we'll see the use of it. 2021 will be a great year.

[kyoukage01 3181]

11 hours ago, Raqeebzy said:

DeFi is here to stay. The earlier we realises this, the better for investment opportunities. We can see some positives in solid DeFi projects like LINK for a perfect example. I believe that and we'll see as time goes on.

Just as important cryptocurrency events doesn't have immediate impacts, like the halving process of BTC, ETH 2.0 launching effect too on the whole market will follow suit and with time we'll see the use of it. 2021 will be a great year.

First, the BTC bullrun this year, and then the (possible) ETH bullrun next year. Both years will be great for crypto despite the overall economic gloom set upon by the coronavirus this year.

 

While waiting for that possible ETH event, DeFi projects and the tokens already established in the market should try to improve themselves in the meantime. DeFi is still very far from perfect, as an online report revealed. (topic about the report is in this link)

 

Edited December 16, 2020 by kyoukage01

[Nab 263]

when many defi tokens came out they had high margins for growth in value including large profits for investors,after days or months some of tokens have had a considerable drop in price and also the high commissions for paying eth or trx transactions means that there are no large profit returns, even so the defi market is still profitable.

[Whited35 15285]

On 12/12/2020 at 9:48 AM, kyoukage01 said:

Buying DeFi tokens will be risky at this point. Well, the DeFi craze may have been already dying down now anyway, so unless something happens that will prove to hugely benefit DeFi, then investing too much on DeFi should be proceeded on with caution.

Weird to see, whenever pullback in price of Bitcoin occurs, sharp price drops for top altcoins including DeFi tokens can also be seen in the markets. Despite the craze to DeFi sector, price of DeFi tokens were seen decreasing when Bitcoin experiences some corrections probably due to their interconnection with Bitcoin and uncertainty about the future momentum. 

[kyoukage01 3181]

14 hours ago, Sayed014 said:

Hii dear friend...The earlier we realises this, the better for investment opportunities. We can see some positives in solid DeFi projects like LINK for a perfect example. I believe that and we'll see as time goes on.

Just as important cryptocurrency events doesn't have immediate impacts, like the halving process of BTC, ETH 2.0 launching effect too on the whole market will follow suit and with time we'll see the use of it. 2021 will be a great year.

When DeFi platforms stop being a "crazed" short-time fad and start being a "seriously good" investment option, that would probably be the time when DeFi will have sufficient market presence that will not be so easily swayed by other coins especially BTC. Given an added year or so, by this year's end we may be able to see what already-established DeFi platforms would have accomplished. Until then, let's hope they can consistently deliver what they've been offering all this time.

 

On 1/22/2021 at 10:02 PM, Whited35 said:

Weird to see, whenever pullback in price of Bitcoin occurs, sharp price drops for top altcoins including DeFi tokens can also be seen in the markets. Despite the craze to DeFi sector, price of DeFi tokens were seen decreasing when Bitcoin experiences some corrections probably due to their interconnection with Bitcoin and uncertainty about the future momentum. 

Well, Bitcoin has always been (and probably still is) the representative of the whole cryptocurrency industry. IMO all the altcoins and tokens, DeFi included, ultimately are priced against Bitcoin, and if given a choice, a vast majority of crypto users would rather hodl BTC. So it shouldn't come as a surprise that when BTC price charts goes wild in a short period, the other coins are being 'forced' to dance to its tune as well, as crypto traders will try to sell their altcoin holdings to BTC to sell/trade at exchanges.

 

[Dorjoy12 8962]

On 12/12/2020 at 10:03 AM, kyoukage01 said:

But still, the cryptocurrency market is indicating greed as of today, so we won't be seeing DeFi tokens suffering from a very, very steep drop at least for a few more days or weeks

If not btc price  remain  stable for some time or decrease  down continuously  then there has no chance  for DeFi or for altcoin  to have a good pump.. Did you notice last few days alt movement  but suddenly  btc pump and the market  of altcoin crash down.. This is called real coin power. 

[kyoukage01 3181]

On 1/31/2021 at 1:12 AM, Dorjoy12 said:

If not btc price  remain  stable for some time or decrease  down continuously  then there has no chance  for DeFi or for altcoin  to have a good pump.. Did you notice last few days alt movement  but suddenly  btc pump and the market  of altcoin crash down.. This is called real coin power. 

Some altcoins and DeFi tokens really are hurting with BTC's current performance, and it looks like BTC will still look that way for this month as well. There are some tokens that are also performing well despite what has happened though, based on their charts during the last 7 days. Take a look at this.

 

Spoiler

source: https://coinmarketcap.com/defi/

I had only the top 10 displayed in the picture, you may see the rest of them in the link.

 

You can see over there which DeFi tokens' prices have fallen and which ones haven't much so.

 

Edited February 1, 2021 by kyoukage01

[Dorjoy12 8962]

14 hours ago, kyoukage01 said:

You can see over there which DeFi tokens' prices have fallen and which ones haven't much so.

Since DeFi protocol  get created  i am not interested  on their project  totally  because  sooner or later they will be like IEO or ICO..  By the way, its true recently  lot of altcoin  pumped significantly  and this are doge, UNI and now xrp coin Which  are unliveable  though  some people saying its a fake pump.

[Ridam 7455]

I think the main reason is Fomo, as if the btc makes correction or small pullback, People starts worrying more holding btc and alts the same. And reason of which we sa a sell prssure coming to the alts resulting the price to dump more than btc. Even small correction in btc makes all altcoins heavily dump.

Specially in the bull run, we see alot of example about it all the time. And as the btc is major dominant in crypto it makes the alt to move up and down respectively.

[kyoukage01 3181]

On 2/4/2021 at 1:36 PM, Ridam said:

I think the main reason is Fomo, as if the btc makes correction or small pullback, People starts worrying more holding btc and alts the same. And reason of which we sa a sell prssure coming to the alts resulting the price to dump more than btc. Even small correction in btc makes all altcoins heavily dump.

Specially in the bull run, we see alot of example about it all the time. And as the btc is major dominant in crypto it makes the alt to move up and down respectively.

That's one thing. Another reason may be that traders may want to deal with buying BTC when it dumps, so they will sell their altcoins and DeFi tokens as extra funds so they can buy more BTC. Unwittingly, that would cause the other coins to drop as well.

 

13 hours ago, Kenny Campbell said:

DeFi tokens are very specific, cause there is thoushands of them and I also think, that they are causing high ETH transaction fees. Cause, when you want to farm some DeFi token you have to do something with that Dapp, like making a loan and then you will get some DeFi tokens.

ETH 2.0 was supposed to solve the high ETH gas fees problem. Haven't the effect still being felt yet?

 

And there is also the option of new DeFi projects using another platform other than Ethereum, like Tron. If you were to compare Ethereum and Tron, which transaction fee is higher? If Tron's is cheaper, the new projects might think of making developments over there instead.

 

[Whited35 15285]

On 1/28/2021 at 11:01 AM, kyoukage01 said:

 So it shouldn't come as a surprise that when BTC price charts goes wild in a short period, the other coins are being 'forced' to dance to its tune as well, as crypto traders will try to sell their altcoin holdings to BTC to sell/trade at exchanges.

Pair price strength does matter 😉. UNI/BTC, YFI/BTC, etc. DeFi token's pairs against Bitcoin are highly sensitive against the movement created by Bitcoin in the cryptocurrency markets. Most of the time, I have seen such pair price strength is directly proportional with the Bitcoin(By taking the constant factor😜). Take a look at the following chart, lol graph is exhibiting the downtrend as we have seen a sharp dump on Bitcoin yesterday.