Why Altcoins Crashed On Monday

The world’s main benchmark interest rates are about to be cut, so all things being equal, cryptocurrencies should be the flavor of the moment for investors. After all, when rates fall, the more speculative assets grow in popularity, hence the anticipated upside for digital coins and tokens.

However, the opposite was evident as this trading week began. There has been little direct negative news affecting cryptos, however many were trading in the red when tracked since last Friday afternoon. Bitcoin Cash (CRYPTO: BCH) was down nearly 8% in that stretch, while stacks (CRYPTO: STX) decreased by almost 10% and Polygon (CRYPTO: MATIC) almost 11% reduction. A few managed to swim in the black, but not necessarily by much; climb (CRYPTO: SUI)one, they could only manage a sub-1% gain.

No news is good news

Collectively, the crypto world is holding its breath awaiting news from Wednesday’s Federal Open Market Committee (FOMC) meeting. The Federal Reserve Board (Fed) will determine whether and by how much it will cut key Fed interest rates.

There is little reason for crypto investors to be nervous about this. Inflation, the man that keeps Fed officials up at night, is clearly on the decline and there has been plenty of pressure on regulators to loosen their monetary strings. Fed officials have gone so far as to essentially promise a rate cut. The only speculation these days is how much — many assume it will be a 50-basis-point shave, though a sizable minority anticipate a 25-basis-point cut.

Since there isn’t much doubt in the collective investor’s mind that rates are about to drop, many might think that a price cut in cryptocurrencies is already set. Before Friday’s slowdown, they were enjoying a rally, and as always in the crypto world, a lot of investors could be selling to lock in recent gains. We should never underestimate the power of profit taking that can be spread across a volatile asset class like this.

Follow these ETFs

Interestingly, inflows into crypto exchange-traded funds (ETFs) were strong on Friday, with more than $263 million being injected into Bitcoin funds — the highest level since July 22, according to crypto news and analysis site Coindesk. This indicates that still-robust demand may be lurking beneath the sudden bear market, and a recovery — if not a surge — is in store if and when the FOMC announces its rate cut.