Volatility, Thy Name Is Crypto!

cryptocurrency oct29 20sep21 lt

Volatility is here to stay. If you ever thought of timing your entry into crypto space after volatility abates, perhaps you are unlikely to move an inch from the fence.

Crypto world's whipsawing tryst with boom-bust, hot-cool and bubble-stable scenarios appear to be inevitable and inherent to the technological, social and economic trends that are redefining the industry with each passing a day. A catalytic volatility could be intrinsic to how the crypto ecosystem has evolved till now and is destined to evolve in the future.

Market leader Bitcoin (BTC) is currently trading at $44,161.38. The market leading cryptocurrency has lost 7.66 percent in 24 hours and 1.08 percent over a seven-day horizon. Though BTC has shed close to 24 percent over a six-month period, it has recorded a gain of about 300 percent over the past twelve months.

Rival contender Ethereum (ETH) is currently trading at $3,062.71. The lead alternate coin has lost 9.59 percent in 24 hours and 5.22 percent in seven days. ETH has gained close to 70 percent in 6 months and around 725 percent in twelve months.

Our customary review of the top-15 coins based on market capitalization as per coinmarketcap.com reveals two new entries as well as two rank movements. Notably, Cosmos (ATOM) that was ranked 21st at the time of previous review has entered the 14th position, pushing Internet Computer (ICP) to the 16th slot and Polygon (MATIC) to the 17th slot. Filecoin (FIL) which had recently been eliminated from the top-15 coins returned to the top-league. Avalanche (AVAX) has advanced one step to 9th position pushing Terra (LUNA) a notch down.

Cosmos (ATOM) was one of the six coins in the top-100 coins that we had identified in our last review as showing extraordinary price momentum of more than 40 per cent over a seven-day horizon. Its market capitalization ranking has improved from 21 to 14 in a matter of 3-4 days.

What is the frenzy driving prices of Cosmos (ATOM) and Avalanche (AVAX)?

Cosmos (ATOM), described by developers as the "internet of blockchains" has witnessed a growing interest fueled by the functionality of the Inter-Blockchain Communications Protocol.

As per the Cosmos whitepaper, Cosmos is a network of many independent blockchains, called zones. The first zone on Cosmos is called the Cosmos Hub. The Cosmos Hub is a multi-asset proof-of-stake cryptocurrency with a simple governance mechanism which enables the network to adapt and upgrade. In addition, the Cosmos Hub can be extended by connecting other zones. The hub and zones of the Cosmos network communicate with each other via an inter-blockchain communication (IBC) protocol, a kind of virtual User Datagram Protocol or Transmission Control Protocol for blockchains. Because anyone can connect a new zone to the Cosmos Hub, zones allow for future compatibility with new blockchain innovations (source: coinmarketcap.com).

The growth in Avalanche (AVAX) is attributed to reasons like fast processing times, the favorable growth trends for DeFi and NFT projects over the last month as well as recent reports of interest by institutional investors like crypto hedge funds and blockchain asset investment firms. The price momentum could also be attributed to the growing speculation that AVAX could replace Solana (SOL) as the new "Ethereum killer".

In the reconstituted top-15 coins, no coins are making positive returns over a 24-hour horizon. Insofar as seven-day returns are concerned, only Avalanche (AVAX) that rose 10 percent and Cosmos (ATOM) that gained 18 percent, are making positive returns.

The meltdown follows investor caution in the backdrop of a series of negative updates from the crypto world including probes on insider trading violations at cryptocurrency exchange Binance and rumors of regulatory actions on stable coins, mitigation of ransomware attacks, use of crypto in illicit transactions etc.

Terra (LUNA) is the worst performer losing 15.75 percent over a 24-hour horizon and 16.25 percent over a seven-day horizon as anxiety grips the market over likely regulations on stable coins by U.S. government. As per its whitepaper, Terra is a blockchain protocol that supports stable programmable payments and open financial infrastructure development. It is supported by a basket of fiat-pegged, seigniorage share style stable coins which are algorithmically stabilized by its native crypto asset, Luna.

The wider crypto space is also reflecting the general down turn in prices. In the top-100 space, excluding the top-15 that we analyzed in detail earlier, 14 are making positive returns over 7-day horizon and 71 are making negative returns only.

83rd ranked Dero (DERO) with a gain of 25.14 percent and 41st ranked Celo (CELO) with a gain of 21.84 percent display the greatest weekly price momentum. Closely following these are 100th ranked PAC Protocol (PAC) and 70th ranked Velas (VLX) that have both gained close to 20 percent in a week.

As the crypto world dithers between the euphoria of an explosive mainstream integration and the turmoil of a regulatory crackdown, it may be necessary to brace for more persistent bouts of volatility, whose ferocity or velocity may deem unpredictable.

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