What happened

This weekend, there was some rather impressive volatility in the crypto markets. A flash crash early Saturday morning led to a number of key large-cap cryptocurrencies losing a tremendous amount of value in short order.

Most large-cap cryptocurrencies followed Bitcoin’s lead, after the world’s largest cryptocurrency saw a dramatic 18% decline in one hour. This extreme volatility did not spare popular meme tokens Dogecoin (CRYPTO:DOGE) and Shiba Inu (CRYPTO:SHIB), with these tokens down 10.3% and 8.4%, respectively, over the past 24 hours as of 8pm ET.

However, there were a few bright spots. Among the winners from this chaos is Terra (CRYPTO:LUNA), a stable coin ecosystem that’s growing in popularity right now, for obvious reasons.

Today, Terra has officially moved into 10th spot in the cryptocurrency market cap rankings, pushing both Dogecoin and Shiba Inu out of the top-10 leaderboard.

Image source: Getty Images.

So what

There are a number of reasons why investors choose to invest in cryptocurrencies. Some investors may want to diversify their portfolios into alternative asset classes. Others may like the growth potential of this nascent space.

However, a key focal point of many investors when it comes to cryptocurrencies is the potential hedging effect these tokens are supposed to have in times of crises in other markets.

That said, the rather sharp decline in crypto valuations we saw earlier this morning has created a growing divergence among cryptocurrencies that are viewed as true safe havens, and others that could be suffering from too much leverage, such as meme tokens.

In the case of Terra, a prominent stable coin ecosystem, investors appear to be enamored by the stability of Terra, as well as the growth potential of realistic use cases with this token, and the resulting utility generated by LUNA.

Now what

Part of the reason why both Dogecoin and Shiba Inu have been exiled (at least for now) from the top-10 cryptocurrency leaderboards is the relatively weak performance of these meme tokens of late. Both dog-inspired tokens have dropped more than 25% over the past month, and substantially more from their highs.

A flight to safety appears to be taking place in most asset markets. For those looking for a stable, long-term core holding, Terra has become a high-profile token, in short order.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Source: https://www.fool.com/investing/2021/12/04/crash-what-crash-this-token-just-replaced-dogecoin/

Leave a comment

Your email address will not be published. Required fields are marked *