Why Altcoins Are Plunging Today

The cryptocurrency market is experiencing a day of big sell-offs in Thursday’s trading. Bitcoin‘s token price was down 4.8% over the previous 24 hours of trading as of 16 ET, and Ethereum‘s price fell 9.2% in the period. The pullback in valuation has been even more pronounced in the altcoin space.

The popular meme token Shiba Inu (SHIB -27.61%) saw its price drop 11.5% during the last trading day. Meanwhile Cardano (ADA -25.63%) was also down 11.5% across the stretch, and Chain link (CONNECTION -23.85%) fell 13.2 per cent

Shiba Inu is losing ground amid a wave of selloffs affecting the broader crypto market. Crypto prices are experiencing a major bounce following news from the Federal Reserve yesterday that suggests a less bullish macroeconomic backdrop in 2025. With concerns that inflationary pressures may persist, it now appears that interest rate cuts will come at a slower pace than previously expected .

Why is the Fed’s interest rate decision pushing altcoins down?

With its meeting yesterday, the Fed announced that it was moving forward with a 25 basis point rate cut. The cut marked the central bank’s third rate cut since September and brought the benchmark rate down to 4.25%. The move was in line with market expectations, but comments from Chairman Jerome Powell shocked the market and put an end to a recent wave of bullish momentum that has driven up the valuation of cryptocurrencies and speculative stocks.

Powell indicated that the recently announced rate cut was not an easy decision and signaled that the Fed will take a more cautious approach to rate cuts in 2025. The Federal Reserve said it now expects to deliver only two subsequent rate cuts of 25 basis points next year, down from its previous forecast of four cuts at that level. Lower interest rates have typically been a bullish catalyst for cryptocurrencies, and the less favorable interest rate outlook is driving significant sell-offs in Shiba Inu, Cardano, Chainlink and other tokens.

What’s next for Shiba Inu, Cardano and Chainlink?

Even on the heels of recent pullbacks, Shiba Inu’s token price has risen by around 107% in 2024’s trading. These gains have been largely driven by speculative investments, meme coin momentum, and expectations that the incoming Trump administration will take steps that will promote the growth of the crypto market.

While the change in presidential administration and the shift in congressional makeup next year could create catalysts that drive Shiba Inu’s token price higher, investors should keep in mind that the token’s rally this year has not been driven by fundamentals. Therefore, if macroeconomic conditions take a turn for the worse or other disruptive risk factors take center stage, it is reasonable to expect that the cryptocurrency could see significant downward pressure.

Cardano’s and Chainlink’s performance will likely be affected by the same macroeconomic dynamics that shape Shiba Inu’s performance. Lower interest rates mean that it is cheaper for investors to borrow money. In turn, this can make it more attractive to borrow money and put it into relatively high-risk investments in pursuit of explosive returns. Lower interest rates also mean that companies can borrow money more cheaply and then invest that capital in growth initiatives, which can help power gains for the overall stock market — as well as other speculative investment classes.

On the other hand, Cardano and Chainlink also have more material fundamental valuation cases compared to Shiba Inu. While Shiba Inu is primarily a meme token with a limited use outside of payments and speculative investment, both Cardano and Chainlink are supported by networks centered around facilitating other projects and applications. This does not necessarily mean that they will outperform the Shiba Inu, but it does suggest that there are a greater number of factors that can help shape their respective valuations.

In the near term, there is a good chance that valuations for top altcoins and the crypto market as a whole will continue to be highly volatile. Investors are still weighing the impact of next year’s rate plan against potential benefits from regulatory changes under the incoming Trump administration, and token prices could see more big swings.