Why Altcoins Were Subjected This Week

There have been many great weeks to own altcoins, and as with any volatile asset class, plenty of bad ones to match. Last week, unfortunately, belonged to the second category, with new fears about the macro economy affecting the value of more than a few coins and tokens.

A large number of altcoins took double-digit hits over the period. According to data compiled by S&P Global Market Intelligence, Toncoin (TON -3.76%) decreased by 14%, Polygon (MATIC -2.14%) did somewhat less badly with a 13% decline and fit (APT -1.86%) it outperformed both by falling nearly 17%.

Surprise downside

Much of the bearish action in crypto trading took place on Friday after the Bureau of Labor Statistics released its latest unemployment data. While none of the data was alarming, it wasn’t all that inspiring either. They revealed that employers in this country added 142,000 jobs in August.

This was considerably below the 165,000 average expected by economists and provided new concern to coin and token holders. A tighter labor market theoretically increases the chances of the Federal Reserve (Fed) cutting its key interest rates aggressively, while a weaker-than-expected one could make it more cautious about cutting.

Ahead of the August jobs report, many economists and more than a few crypto-heads were counting on the Fed to cut rates by 50 basis points. According to the report, that scuttlebutt appears to be centered around the 25 basis point level. If the regulator is in a particularly cautious mood, in keeping with recent custom, it could leave rates untouched entirely.

Why should crypto investors and speculators care what the Fed does? Because interest rates have an impact on the overall level of risk that market players are willing to accept. All things being equal, lower rates make safe investments like government debt less attractive and, conversely, increase the appeal of higher-risk assets like cryptocurrencies.

Discounts abound

Given the frequent violent fluctuations in cryptocurrency prices, it’s easy to panic when it’s falling in value or overly optimistic when it’s rising. This happens twice when major economic data surprises either up or down.

So in times like this, people interested in crypto should be cautious and picky. Now is probably not a good time to get some meme coins, for example. That’s because coins and tokens connected to more utilitarian platforms will likely rise faster in the next rally. Toncon, Polygon and Aptos, then, look pretty good from that perspective now.