Altcoins like Ethena (ENA), Celestia (TIA), and Cosmos (ATOM) prices continued diving on Tuesday morning. Ethena token retreated to $1 while Celestia and Cosmos moved to $10.2 and $8.05. These tokens have retreated by double digits in the past few weeks.
A closer look at this plunge shows that it is happening at a time when the crypto fear and greed index retreated to the greed zone of 60. It has retreated from the extreme greed zone of 88 a few weeks ago. There are signs that this index will move to the neutral phase in the coming weeks.
Celestia vs Ethena vs Cosmos prices
Analysts cite several factors for the crash. First, there are signs that the Federal Reserve may not start to cut interest rates earlier than expected. That’s because the US economy is doing well while inflation has remained at an elevated level.
Recent data shows that the American inflation jumped to 3.5% in March while retail sales continued soaring. The unemployment rate hs retreated to 3.8%. Therefore, the options market shows that the Fed will not deliver as many interest rates as expected.
There are also signs that other central banks will cut interest rates earlier than the Fed. The Swiss National Bank (SNB) has already cut interest rates. Other major banks like the European Central Bank (ECB) and the Bank of England (BoE) are expected to cut in June.
Second, these altcoins are plunging as the Bitcoin halving countdown continues. This halving event will happen in the next three days. Therefore, the crash is mostly because of a situation known as buy the rumor, sell the news. In most cases, Bitcoin tends to retreat ahead and after the halving event. Altcoins, on the other hand, move in sync with Bitcoin.
Third, these altcoins are crashing as the US dollar and VIX have all jumped sharply in the past few weeks. The dollar index has soared to $106.3 while the VIX is nearing $20. VIX has roared back by over 60% from its lowest point this year.
This is a sign that volatility is rising, leading to outflows from risky assets like cryptocurrencies and stocks. Indeed, the Dow Jones and the S&P 500 indices have all retreated in the past few weeks. The Dow Jones retreated by more than 200 points on Monday after shedding over 500 points on Friday.
In most cases, altcoins like Ethena, Celestia, and Cosmos ATOM tend to crash when the fear and greed index is retreated.
There are also lingering concerns about Ethena, one of the fastest-growing cryptocurrencies in the market. Investors are concerne that the USDe stablecoin could become the next Terra because it is not backed by fiat currencies. Instead, like Terra USD USDe is backed by algorithms that ensure its stability, something that can break.
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