What happened
The cryptocurrency market has gotten hammered over the last few days and Monday's price action isn't any better. Major cryptocurrencies like Bitcoin and Ethereum are down over 6% in the last 24 hours and many altcoins have done even worse.
Terra's Luna (LUNA +1.96%) coin lost as much as 10% of its value against the U.S. dollar in the last day as of 12:30 p.m. ET. Arweave (AR 3.69%) fell as much as 10.9%, and Polygon (MATIC +0.00%) dropped 17.9%. The cryptocurrencies are currently down 9.8%, 10.4%, and 15.7%, respectively, in the last 24 hours. The one bright spot was Gala (GALA 5.18%), which rose as much as 22.8% and is now up 6.5% for the day.
Image source: Getty Images.
So what
The sell-off was widespread for cryptocurrencies on very little tangible news. There's low volume in the market ahead of the holidays, but buyers seem to have dried up. As a result, crypto hasn't been a very good hedge against inflation or a falling stock market.
Altcoins have magnified the moves of larger cryptocurrencies like Bitcoin and Ethereum and today is no different. Luna, Arweave, and Polygon are all down more than their bigger crypto rivals.
The reason Gala outperformed the market is the announcement of a $100 million fund from Gala Games and C2 Ventures, which aims to give developers an incentive to build games for the platform. The fund will invest directly in game developers and projects built on blockchain technologies.
Now what
Volatility has been common for cryptocurrencies for years, but the last few months have supercharged the industry's moves. Cryptocurrencies large and small have fallen along with growth stocks, indicating that they're not as safe an investment as some investors would have liked.
What's been common is investors reacting positively to moves like Gala's investment into building a larger ecosystem. Long-term, cryptocurrency has the opportunity to disrupt industries from finance to gaming, but developers need an incentive to build for any given ecosystem. One way to get developers on your platform is by investing in them or offering tokens as a reward. It's these efforts to build a thriving "crypto economy" that investors should keep an eye on.
As the industry is built out, investors should expect a wild ride. If the sell-off in the market continues we could continue to see weakness for cryptocurrencies. And altcoins with little developer activity could be hit hardest. These kinds of moves are the price of admission for cryptocurrencies and right now it doesn't look like a big recovery is coming anytime soon.
