Crypto Market Crash: Why Algorand, Litecoin, Chainlink See Double-Digit Declines

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What happened

Most of the major cryptocurrencies came under intense selling pressure Monday night and early Tuesday morning. Among the biggest losers in the past 24 hours were Algorand (CRYPTO: ALGO), Litecoin (CRYPTO: LTC) and Chainlink (CRYPTO: LINK). Those tokens lost between 12% and 13% each, Tuesday at 9 a.m. EST.

Investors may want to note that this was not a former token-specific drop. Algorand, Litecoin, and Chainlink were simply some of the biggest losers today. The entire industry is said to have lost around $ 200 billion last night, bringing the total cryptocurrency market to a valuation of around $ 2.6 trillion this morning.

Among the catalysts cited by many experts, the reasons for this crash are the continued severe crackdown on cryptocurrency mining in China. Over the weekend, a top Communist Party leader was reportedly kicked out of the party over his support for the cryptocurrency mining industry. And on Tuesday, China’s top economic advisory council suggested that cryptocurrency miners may be forced to pay punitive energy prices, compared to the residential prices many businesses currently enjoy.

Given that this industry-wide crash happened during trading hours in Asia, it appears to be the main driver of price action in crypto markets today.

Additionally, exchange-traded fund provider VanEck yesterday announced its intention to move away from a spot Bitcoin ETF, choosing instead to launch its Bitcoin ETF Strategy as a futures ETF on Tuesday. This strategic shift allows VanEck to join other recent Bitcoin ETF deposits, suggesting that US regulatory oversight over this sector could intensify alongside China.

Image source: Getty Images.

So what

Today, it seems cryptocurrency investors have a rather bearish view of the current regulatory environment for miners. This bearish sentiment appears to be spreading across the industry, reflected in the token prices of some of the market’s most notable cryptocurrencies.

Cryptocurrency mining is integral to the success of various proof of work tokens such as Litecoin. As a result, investors appear to be taking a wait-and-see approach to such tokens at this time.

However, proof-of-stake networks such as Algorand and Chainlink also seem to be feeling the regulatory heat today. Concerns that cryptocurrency ETFs could be blacklisted appear to worry cryptocurrency investors about direct capital flows into the cryptocurrencies themselves.

Now what

The cryptocurrency market has been volatile since its inception. Investors who have taken this volatility to recent all-time highs are once again seeing what bearish momentum looks like.

Many bulls consider today’s sale to be a good breath. Whether this is the case, and this sale will be short-term in nature, remains to be seen. After all, even the largest cryptocurrencies such as Bitcoin have experienced significant losses in value over long periods of time in the past.

Right now, cryptocurrency investors seem to be taking a cautious approach to this sector, which seems reasonable. For long-term crypto bulls, this correction could provide an intriguing entry point. So, the cryptocurrency industry will likely be under scrutiny as investors determine whether this will be a new ‘buy-down’ situation, or rather an extended sell-off.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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