What happened
Just when it seemed the crypto market was hitting a bottom, the value of some of the most well-known tokens on the market dropped again on Wednesday. There wasn't earth-shattering news, but some instability and potentially large sellers in the market are leading to the drop.
Solana's (SOL +2.84%) was the most notable move, falling 6.8% as of 1:20 p.m. ET. The token dropped below $10 briefly and is now down 16.6% in the last week. Dogecoin (DOGE +3.36%) was down 3% over the last 24 hours and The Sandbox (SAND +3.35%) was down 4.6%.
CRYPTO: SOL
Key Data Points
So what
The news from FTX continues to come out, including today's news that Sam Bankman-Fried borrowed money from Alameda Research to buy shares of Robinhood Markets. That's one of the most valuable pieces of collateral in FTX's bankruptcy proceedings and there will likely be a fight over the 7.6% stake in the online broker.
Funds in Alameda wallets are also starting to move, according to on-chain data. Bankman-Fried was released on a $250 million bond just a few days ago and now wallets he once controlled are moving funds around. Solana may be dropping as a result because Alameda is a major holder of the token and investors often front-run a sale before it actually takes place.
It's a tangential cryptocurrency, but Bitcoin miner Argo Blockchain will also avoid bankruptcy after getting a $100 million bailout. If a Bitcoin company needs a bailout, smaller tokens and blockchains may be in trouble, too.
The selling of Dogecoin and The Sandbox is likely related to stronger blockchains and ecosystems running into problems. Investors are fleeing to safety right now and while there aren't many safe places in crypto, a little-used metaverse and a meme coin are probably not the safest of places for your money.
CRYPTO: DOGE
Key Data Points
Now what
Cryptocurrencies are not only going through incredible volatility right now, but volume is also down and the number of buyers is declining. This can lead to rapid price drops on seemingly little news.
The narrative for all three of these cryptocurrencies is getting worse, too. Many investors think Solana is a dying blockchain (despite having many multiples more transactions than larger market cap cryptocurrencies), the meme theme is dying on the market, and metaverses like The Sandbox are facing very real questions right now.
Any investors buying cryptocurrencies right now should be looking at the long-term viability of that blockchain or token. I still think Solana will be a valuable blockchain because it can complete thousands of transactions per second, but that doesn't mean the token will recover anytime soon. Dogecoin was created as a joke and became a meme, but that's not something that will build long-term utility. The Sandbox is another example of an idea that was hot in 2021, but seems to have lost all of its momentum the last year.
I'm slowly buying cryptocurrencies with real utility but with an eye on holding them for years. This bear market will likely last a while and it may be a long time before investors see more mature use cases for cryptocurrencies emerge in the mainstream.
