The cryptocurrency market had a turbulent few weeks, influenced by various events that affected investor sentiment. The Federal Reserve’s hawkish stance during the FOMC meeting increased uncertainty, leading to a drop in Bitcoin’s price below $25,000, and declines in other major altcoins. However, Bitcoin has since recovered to more than $30,000, driving the market higher. Despite the rally, there are many cryptos to avoid on the market.
This market volatility may continue, given the stresses that already exist for many crypto projects. Accordingly, while there are buying opportunities, it is important to conduct risk analysis with high-growth investments. Investors should consider both buying and selling strategies for cryptocurrencies at this point in time, in my view.
With that said, here are three cryptos that have big investors running for the exits right now.
Algorand (ALGO-USD) is an often overlooked but promising cryptocurrency. With its high-speed transactions, low fees, and wide range of potential applications, it stands out in the crypto world. Accordingly, investors looking for hidden value clearly consider Algorand for its potential to become a top cryptocurrency in the future.
However, Algorand falls short compared to other smart contract platforms in terms of the number and quality of its DeFi protocols. With only four open DeFi protocols, none of them stand out in the highly competitive market. Additionally, the significant hack that drained $3 million from the largest decentralized exchange on Algorand, Tinyman, in January 2022 had a devastating impact on the network and its users’ confidence. This helps to make it one of those cryptos to avoid.
Algorand’s level of decentralization is a concern compared to other proof of stake blockchains. With only 100 permissioned relay nodes approved by the Algorand Foundation, it deviates from the decentralized nature of cryptocurrencies and raises security risks. Although the network works and the foundation emphasizes transparency, this may not fully reassure ALGO investors.
Polygon (MATIC-USD), formerly known as the Matic Network, is a layer-two blockchain network built on top of Ethereum (ETH-USD). It was rebranded in 2021 to shift its focus towards Ethereum and enhance the execution of decentralized applications (dApps) on the Ethereum network. Unlike other popular cryptocurrencies, Polygon stands out for its goal of accelerating dApp processing rather than traditional blockchain-based transactions.
Being closely tied to Ethereum poses a significant drawback for Polygon, as it faces competition not only from other cryptocurrencies but also from its own underlying platform. While Polygon’s proponents argue that its faster transaction capabilities would still be valuable even if Ethereum 2.0 is implemented, the emergence of a new programmable blockchain could potentially replace Ethereum and consequently diminish the relevance of Polygon. This helps make it one of those cryptos to avoid.
Additionally, blockchain initiatives like Polkadot (DOT-USD) and Avalanche (AVAX-USD) could present a potential threat to Polygon, as they may gain traction and render Polygon less necessary in the market.
Filecoin (FIL-USD) is facing market challenges, leading to potential selling. The cryptocurrency has experienced a persistent decline over the past few months, with little improvement for investors. In just two weeks, Filecoin has dropped over 30%, and further losses are expected. The charts indicate a lack of bullish momentum since September 2021, with a bearish trend and downward moving averages. The market structure shows lower highs and lower lows, and a price surge in late May was rejected. Overall, the technical indicators for Filecoin are strongly bearish.
Filecoin is currently trading below the 50% retracement level, indicating a potential bounce towards the $3.8 area. However, there is a higher likelihood of prices continuing to decline. In light of these circumstances, investors should proceed with caution, evaluate the risks involved, and consider selling Filecoin before it experiences further drops.
On the date of publication, Chris MacDonald has a position in ALGO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.