Why Many Altcoins Were Sinking This Week

Less-than-inspiring U.S. macroeconomic data contributed to a general decline in altcoin prices this week. According to data compiled by S&P Global Market Intelligence many -- but certainly not all -- were suffering notable declines week to date as of Friday before market open.

Stacks (CRYPTO: STX) was one of them, with a 13% drop across that period. More or less matching that slump were Immutable (CRYPTO: IMX) and Kaspa (CRYPTO: KAS). As ever, though, there were a few healthy plants shooting up through that bone-dry desert floor. Bolstered by news of a new Layer-2 platform created by its developer, Uniswap (CRYPTO: UNI) was enjoying a nearly 17% increase.

Inflation could have been tamer

All things being equal, if an economy -- local, national, or global -- starts looking weak, most investments will start to lose their luster. A slumping economy typically leads to consumers pulling back their spending, while investors become more conservative and start favoring safe-harbor assets.

The U.S. economy is still thriving, let's not be alarmist. But many crypto-heads clearly wish it would thrive more. On Thursday the Bureau of Labor Statistics released its latest monthly inflation readout, divulging that the Consumer Price Index (CPI) rose by 2.4% year over year in September, and 0.2% month on month.

Now, those aren't bad figures at all, considering that the percentages were notably higher in recent months past. So inflation continues to cool, it seems. However, more than a few economists and pundits were expecting a little better -- a survey conducted by Reuters forecast 2.3% for that annual rise, and 0.1% from August.

Cryptocurrencies are among the riskiest financial assets available on the market, so folks who trade them tend to be highly sensitive about inflation figure misses (even if they're marginal). That helped drain enthusiasm for many coins and tokens of various types and utilities.

There's even the possibility that, following the 50-basis-point cut in its key interest rate last month, the Federal Reserve will pull back sharply and follow up with no rate cut at all this month (Atlanta Fed president Raphael Bostic said he was "open" to the idea). Crypto bulls gorge on lower interest rates, as these tend to increase liquidity while making the riskier, non-safe-harbor investments more attractive. Conversely, they can get nervous if reductions look like they might not occur when expected.

Uniswap developer's new chain

One nearly sure way for a crypto developer to buck this trend is to announce some exciting news about its product. That was the wind beneath utility token Uniswap's wings this week.

On Thursday its developer, Uniswap Labs, announced the rollout of Unichain, a blockchain it described as "a fast, decentralized superchain Layer-2 that's built to be the home for DeFi and liquidity across chains." That's quite the leap for the developer and, assuming the system achieves scale and renown, it could become an important crypto finance platform and seriously boost Uniswap's value.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Immutable X and Uniswap Protocol Token. The Motley Fool has a disclosure policy.