Why Altcoins Wilted on Wednesday

Although the crypto industry is not as dependent on computer processing power as it was in its early days, the two remain strongly correlated. Less-than-desirable news from a processing titan unsurprisingly weighed on the values ​​of a wide range of altcoins in late afternoon trading on Wednesday.

It was guilt by association and few seemed to escape the harsh judgment of the market. Crypto utility Spheres (POINT -2.89%) fell nearly 6% at that time, while the token of the smart contract platform Solana (SOL -3.49%) was doing noticeably worse, with a decrease of almost 7%. Meme token Shiba Inu (SHIB 0.43%) decreased relatively easily by 3% and Bitcoin hard fork currency Bitcoin Cash (BCH -1.12%) decreased by 4%.

Processing the latest news from a colleague

For better or for worse, the crypto scene has always been associated with advanced graphics processing units (GPUs) manufactured by the industry’s 800-pound gorilla, Nvidia. So, as with Bitcoin, major developments with that company affect the sentiment on — and frequently the direction of — the altcoin market.

On Wednesday, Nvidia had the temerity to release second-quarter results that didn’t quite light up analyst estimates (or investor expectations). Yes, revenues doubled year over year, and overall net income nearly tripled, but — horrors! — the company’s gross profit margin decreased slightly sequentially. Clearly a victim of wildly overinflated expectations, Nvidia shares fell a few percentage points in after-hours trading and looked determined to stay there.

It’s important to note that while some of the top coins on the market use the proof-of-work (PoW) model that relies on GPUs — we’re looking directly at you, Bitcoin — most cryptos that have hit the market lately favor proof of stake (PoS). The latter is a kind of random validation method that depends much less on raw computing power and speed.

The altcoin’s declines on Wednesday were concentrated in a narrow band of single-digit percentages. This indicates that many investors do not distinguish between PoW cryptos (such as Bitcoin Cash) and many who opt for PoS (Shiba Inu).

The discount hunt will start in 3, 2, 1…

Given that the altcoin run seems to be based more on misinformed worries than anything fundamentally realistic, I wouldn’t expect it to last. I think there will be some sort of rebound in a few days as crypto-heads come to their senses and start sniffing around for bargains again. Even for CPU-dependent PoW cryptos, Nvidia’s results were actually quite good and encouraging. This market should not stay stagnant for long.