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Crypto Crash Underway: Cardano, Polkado, And Avalanche Plunge More Than 30%. Here's Why.
From 4 p.m. ET on Friday, Cardano (CRYPTO: ADA), Polkadot (CRYPTO: DOT), and Avalanche (CRYPTO: AVAX) are among the worst performing large-cap cryptocurrencies, losing 39.3%, 33.7%, and 33.1%, respectively, as of 3 p.m. ET Monday.
As has been the case with most other risk assets, Trump's willingness to fulfill a key campaign pledge and install tariffs on Mexico, Canada, and China have certainly contributed to today's decline irrespective of a subsequent announcement that tariffs on Mexico will be paused after the country made some concessions. As uncertainty rises for investors, and other factors bleed into concern that capital will rotate away from risk and toward more defensive assets, these are three tokens that investors are clearly paying close attention to.
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Let's dive into some of the key factors driving today's sell-off in Cardano, Polkadot, and Avalanche.
Sell-off not driven by underlying fundamentals
What's interesting about this weekend's decline in these three crypto projects is that it's clearly not being driven by underlying fundamentals.
In the case of Cardano, transaction volumes actually surged during this rally as users continue to pile into Cardano's network following its Plomin hard fork, which went live this past week. Most investors involved in the Cardano ecosystem remain bullish on the potential for continued growth and accumulation among those seeking more efficiency in the world of layer 1 blockchains.
Polkadot's slump also coincides with some relatively positive news this past weekend that an application for another spot Polkadot exchange-traded fund (ETF) has been filed with the Securities and Exchange Commission (SEC). As a leading Web3 crypto network aiming to create a decentralized web bringing a number of top blockchains together (focused on improving interoperability), this is a top project that should remain in focus amid its recent plunge.
Finally, Avalanche's own upgrade has reportedly cut its usage fees by around 75%, leading some investors to question the voracity of this recent sell-off. Whether these efficiency improvements will ultimately translate into a continuation of the accelerating transaction growth many expect remains to be seen, but this is a project that many may argue shouldn't be down to this degree.
Can investors turn this sell-off into opportunity?
As is the case with any major sell-off driven almost entirely by one overarching catalyst, there's certainly the potential for some big-time opportunity for investors with a long enough investing-time horizon.
The good news: Cardano, Polkadot, and Avalanche are by no means speculative meme coins. These are projects which have driven significant utility for users in the world of decentralized finance, and look poised to continue to provide the underlying innovation and disruption many have sought out with earlier investments. As these projects roll out new upgrades and improvements, growth should lie ahead. However, no one really knows where prices are headed. At the same time, crypto prices play a big role in shaping how investors think about such projects.
For now, I think taking a cautious approach to this sell-off and waiting for the dust to settle may be a smart move for many investors looking to pick a bottom. It's worth noting that momentum-driven sell-offs like these can last a while in the crypto world. Thus, I'm going to wait until there's some positive momentum higher before building a position in these three tokens.
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Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Avalanche and Cardano. The Motley Fool has a disclosure policy.
