What’s the Point of Buying Altcoins If Macro Keeps Crushing Them? | Daily Crypto Deep Dive

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Welcome back to the Daily Crypto Deep Dive. You research a coin, read about its partnerships, watch the developers deliver, and finally see your investment moving. Then inflation comes in hot, bond yields jump, or another international crisis breaks out, and weeks of progress disappear in an afternoon. Eventually, the question becomes unavoidable. What is the point in buying an altcoin if something completely outside that project's control can keep battering it?

Today, we're giving that question a proper answer, including the uncomfortable possibility that some altcoins simply do not deserve your money.

This week's pressure makes the question particularly relevant. Barron's has highlighted rising oil prices, higher treasury yields, and a stronger dollar as headwinds for crypto.

That combination helps explain the nervous backdrop, although it cannot prove why every individual token fell.

More fundamentally, these episodes expose a misunderstanding about what decentralization actually promises. A network can operate independently of a central bank while its token price remains heavily dependent on the financial circumstances of its buyers. The blockchain might not need permission from Washington. The person buying its token might still have a mortgage, borrowed trading capital, or a fund manager demanding lower risk. When borrowing gets more expensive, or safer assets offer more attractive returns, speculative investments face tougher competition. Nobody needs to switch off your favorite network. Its price can fall simply because the next buyer is willing to pay less, while existing holders need cash more urgently.

There is research behind this. A 2023 IMF working paper by Natasha Che, Alexander Copestake, Davide Forzeri and Tamaro Terracciano identified a common factor explaining roughly 80% of crypto price variation in their sample. They also found that Federal Reserve tightening depressed that factor through reduced risk-taking. That does not mean the Fed causes 80% of every coin's movements. It means apparently different crypto investments can share a remarkably powerful underlying market exposure. For smaller altcoins, the damage can be amplified by limited liquidity.

Think about trying to sell a house in a town where there are hundreds of interested buyers, compared with somewhere only three people are viewing properties. When buyers retreat, the second market can require much bigger price cuts. In an order book with few genuine bids, a relatively modest sale can push through several price levels.

A large market capitalization does not guarantee equally large amounts of money available to buyer tokens.

Borrowing adds another problem. Falling collateral values can trigger liquidations, forcing sales that push prices lower and trigger further liquidations. Researchers Alfred Lehar and Christine Parler documented this feedback mechanism in decentralized lending, in work published by the Bank for International Settlements. That helps explain how an initial shock can become a much larger move.

It does not establish how much of this week's decline came from forced selling, but the mechanism matters when assessing the risk. However, saying altcoins get battered at every macro event goes too far.

Markets respond to surprises relative to expectations. An ugly inflation number can produce relief if investors expected worse. An interest rate cut can disappoint if everyone already anticipated it, or frighten investors if it signals serious economic trouble. There is no reliable rule saying good economic news means green candles. Trying to trade every announcement means correctly judging both the news and what prices already reflected. So why take the risk at all? The strongest answer is that a particular token might offer enough future economic value at today's valuation to compensate for those drawdowns and the possibility of failure. That requires more than identifying a useful project. It requires explaining why the project's success should benefit the token you actually own. A brilliant application can attract customers while most of the financial benefit goes to users, developers, validators or a separate company. Ethereum provides an understandable example of an actual connection. On Ethereum's main network, base fees are paid in Ethereum and burned, removing it from circulation.

New Ethereum is also issued, so the balance between issuance and burning matters. Network activity therefore has a direct connection to token economics, but that mechanism cannot guarantee rising prices. Demand, competition and the price investors initially pay still matter. A token can have real utility and remain an expensive investment. For any other altcoin, ask the same practical question. What creates sustained demand for this token? Must customers hold it? Or can they use the service without owning it? Does revenue reach holders through a defined mechanism? Or is revenue merely a number in a presentation? Are rewards funded by customers paying for something useful or mostly by issuing more tokens? Receiving extra units does not necessarily make you richer if each unit becomes worth less. Supply is especially important because macro can get blamed for weaknesses already built into a token. Binance Research's Ji Xuan Chua and Brian Chen explored this in their 2024 report on low circulating supply and high fully diluted valuations. Their concern was straightforward. Future token releases can create selling pressure if demand does not keep pace. An unlock does not mean everyone sells immediately and known schedules can already influence prices. Nevertheless, ignoring supply means analyzing only half the equation. Consider a hypothetical token with 100 million units circulating at $1 each. Its circulating market value is $100 million.