Altcoins React to Coronavirus and Stock Plunge

The spread of the Coronavirus is affecting more than just the well-being of thousands – maybe millions – of people. Along with its gradual expansion comes the toll it is taking on the economy. Many predict that the fear of the virus’s continued spread will amount to stock prices being dragged down even further. The S&P 500 Index is now in the red by 10% since the start of 2020.

The Dow has been on a downward spiral since the beginning of the Coronavirus outbreak. While cryptocurrencies are performing comparatively better than the Dow, they are still on shaky ground. Bitcoin is taking quite a hit, trading below $9,000 for the first time since January. However, as of February 28, it is still up 20% for the year to date.

But what of other cryptocurrencies? How is the market value of altcoins faring against this epidemic?

Market cap determination

‘Cryptocurrency Market Capitalization’, or ‘Cryptocurrency Market Cap’, is an incredibly useful metric. It is what allows us to figure out the real value of a cryptocurrency. It is a popular metric for traditional securities, however, it has unique implications in the realm of cryptocurrency. Market capitalization is the measurement of the overall value of a security.

Typically, it consists of multiplying the number of outstanding stock shares by the current stock price. In terms of crypto, it is usually the circulating supply of tokens multiplied by whatever the current price is. For example, let’s assume a coin has 100 tokens outstanding and is trading for $10 per coin. In this particular case, it possesses a market cap of $1,000.

Different reactions, different outcomes

Generally speaking, the overall state of altcoins is experiencing a bit of a dip along with Bitcoin. Not all of them, but enough for there to be a noticeable change in market value. Those lucky enough to not be going through the same dip are the ones who are either reacting differently or have no reaction at all.

Near the end of February, crypto markets were shedding another $20 billion in a fall back to approximately $240 billion. At the same time, they were experiencing a collapse by 17% as $50 billion left the space.

Ethereum – a cryptocurrency that was on fire this year – has lost roughly 10%, resulting in a slide below $220. Stellar (XLM) typically follows the movements of XRP, which unfortunately has also undergone quite a beating. XLM would also dump roughly 33% in just under two weeks. In the meantime, XRP has made a loss of 32% during that same period.

The Federal Reserve’s reaction to this financial crisis is to slash interest rates by half a percentage point on Tuesday. This was an attempt to give the U.S. economy a jolt in the face of concerns about the virus. It was the first emergency rate cut to occur since 2008. Furthermore, it marks the biggest one-time cut since that time as well. The new benchmark interest rate as a result of this cut ranges between 1% and 1.25%. The slash would effectively lift the Dow industrial average by 300 points.

Yet, even with this emergency cut, the Dow continues to plunge after the initial short gain. It began tumbling over 560 points before reversing course again. Earlier today, the Dow was roughly 800 points (or 3%) in the negative column.

Tether (USDT)

Tether is a stablecoin, its identification stemming from its being backed 1:1 to the dollar. There are many in the crypto space that believe it to be a safer asset, especially in times of crisis. The market cap dropped considerably between February 18 and 20, as well as at the beginning of March. Beyond those dips, the market cap remains consistent.

Chainlink (LINK)

Chainlink is a decentralized oracle service that aims to connect smart contracts with data from the real world. Unlike the other altcoins mentioned here, this cryptocurrency appears to be booming. The reason why is unclear, but its market cap appears to be increasing more and more.

Dogecoin (DOGE)

Dogecoin is a peer-to-peer cryptocurrency that launched in 2013. The origins of its name come from the “doge” meme. Since its inception, it has become a popular cryptocurrency. The market cap went through a dip during the middle of February. However, since the start of March, it is gradually climbing back up.

During times of economic distress, such as with this Coronavirus outbreak, it’s especially comforting to know that other systems of money are being built as we speak. In fact, they already exist now. Here at HedgeTrade, we’re glad to be part of a movement that could make challenging world events a bit easier for everybody.

Learn about another altcoin in our article: What is Burstcoin?

crypto social trading