Ethereum
Ethereum, Solana and XRP are in free fall today. Here’s why.
Well, this recovery through late 2023 and early 2024 was bound to end at some point.
Many of the best cryptocurrencies in the market today are reeling, as risk assets decline across the board due to various headwinds. Ethereum (CRYPTO: ETH), Solana (CRYPTO: SOL), and XRP (CRYPTO:
A number of macroeconomic forces are causing most long-term assets to decline today. The strengthening US dollar, decline in long bonds (and corresponding rise in yields) and a widespread rotation towards more defensive assets have plagued more speculative asset classes such as cryptocurrencies over the past 24-48 hours.
Additionally, these three tokens have their own set of headwinds that investors seem to be pricing in today. Let’s now take a look at what’s driving this shift in these three major digital assets.
I thought this was a crypto bull market – what gives?
Much of the recent rise in crypto assets over the past few months can be attributed to expectations for a spot. Bitcoin Approval of exchange-traded funds (ETFs). Expected by January 10, such an ETF could pave the way for similar products for Ethereum (given that proposals are already underway) and potentially other major tokens such as Solana and XRP to follow.
As a result, a shift in narrative among many crypto market participants over the past few days is wreaking havoc on investors who are counting on this catalyst. Some analysts and experts, such as Matrixport’s Markus Thielen, believe that final approval for a spot Bitcoin ETF may still be a “long shot.”
This view appears to be spreading, with an increase in bearish bets on major cryptocurrencies driving some of the accelerated bearish movement today. Additionally, according to Coinglass, nearly $100 million worth of bullish perpetual contracts placed on Ethereum were liquidated in the past 24 hours. XRP and Solana are also among the top five crypto tokens in terms of long liquidations today, suggesting that leveraged bullish bets on these tokens are turning sour.
Fundamentals are weakening
Besides the leveraged derivatives market, another key fundamental factor that many investors consider when assessing the health of the crypto market over a specific time period is the total value locked (TVL). TVL generally reflects the amount of capital existing within specific crypto ecosystems. When times are good, capital flows into the crypto sector, and this number increases.
Unfortunately, since the start of the year, the total TVL for all crypto projects has fallen by 5.8% to $52.49 billion. Ethereum, Solana, and XRP saw similar declines in their TVL values, although these three projects still saw their cumulative TVL numbers recover markedly from last year’s lows.
The story continues
While many still expect that a spot Bitcoin ETF could be approved in short order (in part due to various meetings between Wall Street firms and the SEC in recent days), investors and users currently appear to be taking a cautious approach with their capital.
Conclusion
Overall, the crypto industry and many of its major tokens appear to be feeling the effects of uncertainty today. Ultimately, investing is about weighing the odds. And until a few days ago, the market seemed almost certain that spot ETFs would arrive in the near term, leading to risky trading in this sector in projects that could follow Bitcoin’s lead.
The expected decision date is now about a week away. Until then, I expect more volatility on the horizon as more leaks seep into the overall narrative for this sector.
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Chris MacDonald has positions in Ethereum and Solana. The Motley Fool holds positions and recommends Bitcoin, Ethereum, Solana and XRP. The Mad Motley has a disclosure policy.
Ethereum, Solana and XRP are in free fall today. Here’s why. was originally published by The Motley Fool