Although the crypto industry isn’t as heavily dependent on computer processing power as it was in its early days, the two remain strongly correlated. Less-than-desirable news from a processing titan, unsurprisingly, dinged the values of a wide swath of altcoins in late afternoon trading Wednesday.
It was guilt by association, and few seemed to escape the harsh judgement of the market. Utility crypto Polkadot (CRYPTO: DOT) was down by nearly 6% at that point, while smart contract platform token Solana (CRYPTO: SOL) was doing sightly worse with an almost 7% decline. Meme token Shiba Inu (CRYPTO: SHIB) was tumbling by a relatively light 3%, and Bitcoin hard fork currency Bitcoin Cash (CRYPTO: BCH) was down 4%.
Processing the latest news from a peer
For better or worse, the crypto scene has always been associated with the advanced graphics processing units (GPUs) manufactured by that industry’s 800-pound gorilla, Nvidia. So, like with Bitcoin, major developments with that company affect the sentiment on — and frequently the direction of — the altcoin market.
On Wednesday, Nvidia had the temerity to publish second-quarter results that didn’t completely light analyst estimates (or investor expectations) on fire. Yes, revenue more than doubled on a year-over-year basis and fine, headline net income nearly tripled, but — horrors! — the company’s gross profit margin was down a bit sequentially. Clearly a victim of vastly overinflated expectations, Nvidia’s shares slumped by a few percentage points in after-hours trading and seemed determined to stay there.
It’s important to note that while some of the top coins on the market utilize the proof-of-work (PoW) model that relies on GPUs — we’re looking squarely at you, Bitcoin — most cryptos that have hit the market lately favor proof of stake (PoS). The latter is a sort of random validation method that is far less dependent on raw computing power and speed.
The altcoin declines on Wednesday were concentrated in a narrow band in the mid-single-digit percentages. This indicates that many investors don’t distinguish between PoW cryptos (like Bitcoin Cash) and the many opting for PoS (Shiba Inu).
Discount hunting to begin in 3, 2, 1…
Given that the altcoin rout seems to be based more on misinformed worries than anything realistically fundamental, I wouldn’t expect it to last. I believe there will be kind of bounce-back within days as crypto-heads come to their senses and start sniffing around for bargains again. Even for the processor-dependent PoW cryptos, Nvidia’s results were actually quite good and encouraging. This market shouldn’t stay in the doldrums for long.
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Eric Volkman has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin, Nvidia, and Solana. The Motley Fool has a disclosure policy.
Why Altcoins Were Wilting on Wednesday was originally published by The Motley Fool
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