What happened
Cryptocurrency values surged higher on Sunday and the move continued well into Monday. As with most big crypto moves, there weren’t any real fundamental changes, but there may be just a little less uncertainty in the market today than there was a few days ago.
As of 11:00 a.m. ET, Polkadot (DOT 3.07%) was up 10.2% in the last 24 hours, Chainlink (LINK 1.14%) had risen 14.6%, and Cardano (ADA 2.34%) was up 8.9%. Nearly every major cryptocurrency was up big and some small altcoins jumped over 25% in just one day.
So what
Drama in the cryptocurrency industry continued over the weekend with Celsius and Three Arrows Capital potentially facing insolvency and liquidation of some of their positions. That pushed Ethereum below $1,000 and Bitcoin under $20,000 for a short while.
The latest challenge was a decentralized protocol called Solend passing a measure that would allow it to take over the wallet of a large holder and sell Solana (SOL 7.48%) over the counter instead of liquidating on exchanges. The large liquidation could have cratered Solana’s price short-term if around $20 million of tokens were sold immediately.
On Monday, the vote was overturned and essentially became a moot point with the rise in cryptocurrency prices. The crisis was averted, at least for now.
Broadly, the mood around cryptocurrencies seemed to change quickly on Sunday. That could have been in part that some of the liquidation pressure eased and there was a better balance of buyers and sellers in the market.
Now what
Despite the increase in values today, I don’t think this is the end of what’s known as the “crypto winter.” Traders are still under pressure from the drop in cryptocurrency prices and we may be seeing some investors exit the market.
This won’t stop the long-term building that’s still taking place, but developers building real businesses are going to take years, not days, to prove value. The Polkadot ecosystem won’t explode on the scene overnight and Chainlink has a lot of partnership-building left to do. The final payoff could be fantastic for both of them, but that’s not what’s driving today’s price moves.
For investors looking at the blockchain as a source of long-term value and disruption, this is a great time to buy as leveraged traders are getting out. It’s still early in the crypto industry and there are going to be billions of dollars invested in decentralized finance, NFTs, and other blockchain technologies over the next decade. That’s what will ultimately drive value, not leveraged trading, but it will take some time for the market to normalize. In particular, many institutional investors won’t take the crypto market seriously until there’s a firm framework of regulation and taxation in place. Lawmakers and regulators are making moves in that direction but they have a long way to go.
What Polkadot, Chainlink, and Cardano need to do is show they can attract developers even at a time like this. If they can, the future is bright for blockchain technology.
Travis Hoium has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Bitcoin, ChainLink, Ethereum, and Solana. The Motley Fool has a disclosure policy.
