The cryptocurrency market was on fire Monday morning, and the value of some meme coins and tokens related to NFT projects were on a tear.
The Bored Ape Yacht Club-related ApeCoin (CRYPTO: APE) was up 23.5% in the last 24 hours as of 11:00 a.m. ET, the STEPN token was up 26%, Theta Network (CRYPTO: THETA) jumped 9.2% and Dogecoin (CRYPTO: DOGE) was up 5.6%. This follows a week of terrible performance for cryptocurrency generally and specifically altcoins and small tokens.
Over the weekend, there was concern that the collapse of the Celsius Network and Three Arrows Capital would lead to contagion, or a cascading number of failures, in the crypto market. Values dropped across the board and there were even some major liquidations. But there doesn’t seem to have been a worst-case scenario and buyers once again outweighed sellers starting on Sunday afternoon.
Another risk may have been avoided when Solend reversed the use of emergency powers that could have caused up to $100 million of Solana tokens to be sold in the liquidation of a large borrower’s position.
The reality today is that cryptocurrency price movements are driven by short-term trading and over the last few weeks the trading environment has been terrible. Leverage has led to quick liquidations, which has led to more risk in the system being revealed, and ultimately more liquidations. Ethereum briefly fell below $1,000 and Bitcoin dropped below $20,000 over the weekend, levels that seemed improbable only six months ago.
There may have been a number of risks revealed in the cryptocurrency market over the last few weeks, but I wouldn’t be surprised to see more emerge over the next few months. Funds that have been started in the last few years have used leverage to build big positions and those are only discovered by the wider cryptocurrency market when they start to be liquidated.
For tokens related to NFT projects, the volatility will be even more pronounced. These projects need to execute on multi-year plans to build things like the metaverse or a larger ecosystem. Cryptocurrencies and blockchain ledgers are essential components of many next-generation technologies but it’s still early. Many different tokens are jockeying for position as app developers and builders of virtual worlds are selecting the right tools for their upcoming products and services. As these projects are built, the tokens vying for developer attention can be extremely volatile.
While I think the long-term future is bright for the cryptocurrency market, I’m focusing on the top cryptocurrencies with smart contracts that developers can build on right now. Speculating on specific projects is just that, speculation. While the value of some of these tokens and meme coins may be going up today the move could easily reverse tomorrow. In a down market, buying quality is a great idea and that’s what I’m doing right now, which doesn’t include STEPN, ApeCoin, or Dogecoin.