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Many popular Layer 1 projects in the top 100 are down today amidst an overall market selloff. While the cause is unclear, possible factors include a new Covid variant, fears over Chinese debt obligations, and uncertainty regarding the Federal Reserve’s plans for bond purchases.
Crypto Markets Shaken
Several Layer 1 protocols have suffered losses during a wider selloff that has shaken crypto markets over the weekend.
The big losers of the week are Cosmos, Fantom, Elrond, and Harmony. At the time of writing, Cosmos’s ATOM was down 15% on the week, Fantom’s FTM was down 29%, Elrond’s was EGLD down 31%, and Harmony’s ONE was down 35%.
While many coins are down 15-30% on the week, the notable exception is Terra’s LUNA. LUNA is up around 19% on the week despite its 6.5% correction today. Furthermore, much of the market seems to be bleeding against ETH, which is currently holding above $4,000 despite an overall drop of roughly 4% on the week.
It is not just Layer 1 protocols that have suffered the past few days. Even metaverse tokens like MANA and SAND, which have been performing quite well recently, are each down roughly 27% over the past week, and the total cryptocurrency market cap has fallen to $2.25 trillion from nearly $3 trillion in November. The commonly cited Fear and Greed Index places current sentiment at an “Extreme Fear” level of 16 (out of 100), dropping below last week’s rating of 33. Last month, the indicator showed a greedy market at 71.
While many may be perplexed by the state of the current cycle, it appears that there are many possible non-cryptocurrency-specific reasons for the fear in the market. In recent months, negative crypto-specific catalysts, such as regulatory concerns, have seemed particularly pertinent; however, the current downtrend may have more to do with other externalities originating from outside of the crypto space itself.
While reasons for the selloff remain uncertain, likely contenders could be fear surrounding the new Omicron Covid variant, as well as renewed uncertainty surrounding China’s massive real estate developer Evergrande. There also appears to be uncertainty regarding the Federal Reserve’s timeline for tapering its bond purchases.
Disclosure: At the time of writing, the author of this piece held ETH, LUNA, and several other cryptocurrencies.