Why Altcoins Were Flopping on Friday

A forgettable Friday on the equities market and intensifying worries about the state of global trade inspired many investors to avoid cryptocurrencies throughout the day. In late afternoon trading, it was hard to find any that were even trading sideways, let alone adding to their value.

Among the host of decliners was top coin Ethereum (ETH -4.25%), serving as an uninspired example with a nearly 3% price tumble as of 4 p.m. ET. Utility cryptos Solana (SOL -5.91%) and Chainlink (LINK -6.12%) were doing worse with respective 4% and almost 7% plunges into the red at that point. Ditto for the over 8% slide of ever-volatile meme coin Dogecoin (DOGE -8.28%).

Dragging on

Like equity investors — and much of the business world, come to think of it — crypto-heads were, once again, fretting about the stubbornly persistent trade war. The web of tit-for-tat tariffs initially spun by the Trump administration continues to ensnare all sorts of investments, on very understandable fears that the levies will negatively affect economic growth.

Image source: Getty Images.

The most recent developments in trade weren’t encouraging. Towards the end of equity market hours on Thursday, an appeals court reversed a decision reached earlier in the day by the Court of International Trade. The latter body had ruled that many of the Trump tariffs were illegal, as the executive branch lacks the unilateral authority to levy them.

The relief this engendered among the investment community, crypto proponents included, didn’t last very long. Soon thereafter, that appeals court temporarily reinstated the tariffs in question, leaving them in place for an unpredictable length of time.

There is some degree of overreaction here, in my view. Of course tariffs are harmful to almost any kind of financial asset, but this war is turning out to be significantly less destructive than feared. Trump and his team have backed off from many of their most serious threats, exempting certain large product categories (for example, smartphones) and pausing or even drastically reducing other levies.

Going to the dogs?

That said, there are other headwinds buffeting certain coins and tokens, Dogecoin being one of them. The coin, almost unarguably the highest-profile meme crypto on the scene, has a strong and vocal proponent in Tesla CEO and (now apparently ex-) federal government functionary Elon Musk.

That was fine when Tesla was riding high on the stock exchange and Dogecoin received frequent shout-outs in Musk’s account on his X (formerly Twitter) account. It’s less beneficial now that the executive is becoming an increasingly polarized figure, not least for his divisive work with the Department of Government Efficiency (DOGE, as it’s known by its convenient acronym).

On Friday, The New York Times published an article detailing Musk’s conduct in the thick of DOGE’s efforts early in the current Trump administration. Citing unnamed “people familiar with his activities,” the newspaper alleged that Musk conducted himself both professionally and personally in quite an unbecoming manner.

Dogecoin holders were surely getting nervous about this latest hit to the reputation of the coin’s No. 1 advocate…and trading accordingly.

Bargain buys

I feel that while the trade war continues at any level, sentiment on cryptocurrencies will remain muted. That opens quite the possibility for bargain-hunting, though, as it’s often beneficial to buy while other investors are sitting on the sidelines at best, and selling assertively at worst. This would be a good time for crypto bulls to flag coins and tokens that have suffered notable drops in value.

That includes Ethereum, as it will undoubtedly stay a bellwether coin for the asset class as a whole. As I have previously, I’d recommend considering beaten-down utility coins, as they’re the motor that will help drive crypto development generally (as they perform useful functions, in contrast to still-not-very utilitarian plays like Dogecoin).