The crypto market took a nosedive this week, and it wasn't just Bitcoin (BTC -1.00%) that was impacted, although it is down 2.8% over the past week and trading at $67,455 as I'm writing. Magnifying the volatility were the performances of altcoins, which dropped by double-digit percentages in many cases.

According to data provided by S&P Global Market Intelligence, Cardano (ADA -3.45%) fell by as much as 13.5% in the past week, Uniswap (UNI -4.33%) plunged by as much as 14.8%, and Dogecoin (DOGE -6.35%) was off 20% at its low. Those tokens were down by 9.1%, 11.2%, and 14.1%, respectively, as of 2 p.m. ET Friday.

The Fed rules the day

There was a massive "risk off" trade after Federal Reserve officials suggested that it would put off cuts to the benchmark federal funds rate for longer than had been expected. The market responded by pushing interest rates higher in the U.S. and around the world.

According to Bloomberg, the yield on the U.S. 10-year Treasury bond rose 6 basis points in the past day and 22 basis points in the past month to 4.37% while yields on bonds for most European countries are up by single-digit basis points over those time frames.

No matter how you look at it, interest rates for securities in the market are going up, which makes those fixed-income assets more attractive relative to higher-risk assets like growth stocks and cryptocurrencies. As we saw in 2022, when interest rates rise, crypto prices fall. That's what occurred this week.

Good news and bad news

The biggest token-specific news about Cardano was that Grayscale said it had removed the token from multiasset funds as part of a quarterly rebalancing. Cardano's potential as a fast, low-cost blockchain hasn't attracted the users or developers that its backers hoped it would, and the token is sliding as some investors give up on its future.

News from Uniswap was a little more positive with an announcement that the decentralized exchange had passed $2 trillion in all-time trading. It took the exchange 42 months to hit the $1 trillion total trading volume mark, and just 24 months more to pass the $2 trillion mark.

Dogecoin has dropped in part because meme coins are a little less attractive in a rising interest rate environment. But there's also the planned launch of Dogecoin20 in April, which could bring increased competition to that specific meme. Dogecoin20 is also expected to be deflationary, in contrast to the inflationary Dogecoin, which may attract some investors to it.

Volatility is the name of the game

The reality is that the prices of cryptocurrencies are often correlated to growth and tech stocks, which means they're going to decline if interest rates move up or if there are expectations that they will.

A big risk investors need to consider in 2024 is whether or not the market overall has gotten overvalued. If growth or earnings begin to decline, the great run that has been underway over the last 15 months could end in a sell-off. And cryptocurrencies would likely get punished in any broader decline.

I remain bullish on crypto for the long term, but think the best investments will be the companies that are learning how to use blockchains to be more efficient. And they will likely be cryptocurrency agnostic.