What happened 

Cryptocurrencies have had a bad week in general, as the industry's worst side gets unending media attention. Sam Bankman-Fried's trial is putting both crypto and its most infamous person in the spotlight -- and a lot of investors and lawmakers are saying they don't want any part of it. 

While most tokens are down, there are four leading the market's losses. Polygon (MATIC 9.15%) is down 9.2% over the past week, Polkadot (DOT 7.60%) has fallen 9.3%, Arbitrum (ARB 7.69%) has fallen 10%, and Avalanche (AVAX 9.12%) has declined 14.6%, according to data provided by S&P Global Market Intelligence

So what 

Sam Bankman-Fried's trial has been all over the news, social media, and on podcasts this week, reminding everyone of the worst side of the crypto industry. And the timing for companies involved couldn't be worse. 

In the U.S., a bill that would set up a regulatory framework for cryptocurrencies and the companies in the industry has made its way through committees in the House of Representatives, and it's widely thought there could be a vote on the bill in the next few weeks. But former House Majority Leader Kevin McCarthy was ousted, leaving Congress with less legislative direction.

It hasn't helped that interest rates rose earlier this week, although they fell in the last two days, and higher rates have generally pushed investors to lower-risk assets. This pushed the stock market lower, and crypto generally follows the stock market. 

Now what 

Cryptocurrencies are in the core of a very speculative environment because there's little clarity in the U.S. right now. Investors go from hope to fear about regulation and Congress actually passing a law, but those bills always seem to stall out. 

Day to day, investors are fluctuating between buying riskier assets and abandoning them, depending on the mood of the market. Higher risk tolerance is good for crypto, and the opposite is true. The reality right now is that crypto is often correlated with stocks and only magnifies their gains or losses every day. 

What I'm looking for long term is the industry to find more use cases for crypto, and there have been some steps in the right direction. Companies like Visa, Shopify, and MercadoLibre are adopting cryptocurrencies for payments, so there's interest at a corporate level to test how it could help their operations. 

Some countries around the world are passing regulations that give blockchain companies clarity, and they could become development hubs for financial or other digital assets. If the U.S. follows, it could open up a wave of investment. 

But even these bullish signs are speculative because it's not clear how corporate adoption or more blockchain development would necessarily help any specific cryptocurrency. So the industry continues to see volatility, and this week that volatility worked against Polygon, Polkadot, Arbitrum, and Avalanche more than most tokens.