What happened
The crypto market had a turbulent weekend, which has extended into trading on Monday. The drop has been caused by some insiders selling Ethereum (CRYPTO: ETH) and Bitcoin (CRYPTO: BTC) transactions slowing to a crawl.
At 2:40 p.m. ET on Monday, Bitcoin has dropped 5.3% in the last 24 hours, Ethereum is down 5%, and Dogecoin (CRYPTO: DOGE) has lost 7.8% of its value. A lot of altcoins are down by double digits, so this is the best corner of the market right now.
Image source: Getty Images.
So what
The drop in Ethereum really started on Saturday when the Ethereum Foundation transferred nearly $30 million of tokens to the Kraken exchange, indicating they may sell tokens to fund operations, which the organization does periodically. This selling pressure is something traders were getting out in front of over the weekend, and that continues today.
Bitcoin fell in part because on Sunday, Binance temporarily closed withdrawals. The Bitcoin network was extremely congested, and on Sunday, there were 395,000 transactions waiting to be confirmed. According to Coindesk, the average transaction fee on the Bitcoin network jumped from $1.20 last week to $20 on Monday, which was the first time it hit that level since Bitcoin was over $60,000.
Dogecoin is one of the most emblematic memecoins or altcoins, and it's following its larger competitor today. But it's only down a small amount compared to the altcoins down double digits today.
Now what
The last few months have seen a rapid recovery across cryptocurrency assets, and some of the drop today may simply be profit-taking. New tokens like Pepecoin have captured the market's attention and skyrocketed, but that euphoria rarely lasts.
At the same time, some of the biggest problems with crypto's wider adoption are being seen in just the last few days. Gas fees on Ethereum, which are the fees paid to complete a transaction, have gone up, and Bitcoin is facing the same problem. High fees make crypto almost unusable for anything but the largest transactions, and that's long been a criticism of the industry.
I also think we need to be aware of what Binance does in crypto. When companies like FTX and Celsius froze withdrawals, it was a sign of future collapse. That hasn't happened at Binance, but as the largest crypto exchange, it's a critical cog to the industry.
The crypto industry seems to be in much better shape than it was a year ago before a lot of leverage was exposed in the ecosystem, but that doesn't mean there won't be similar drops in the market. That's what investors were concerned about, given the activities on Ethereum and Bitcoin. Whether they will have long-term impacts will take time to tell.
