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 (DOT 1.98%) was down by nearly 6% at that point, while smart contract platform token Solana (SOL 6.43%) was doing sightly worse with an almost 7% decline. Meme token Shiba Inu (SHIB 0.84%) was tumbling by a relatively light 3%, and Bitcoin hard fork currency Bitcoin Cash (BCH 7.21%) 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).
CRYPTO: DOT
Key Data Points
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.
