Earlier this month, XYO Network (CCC:XYO-USD) went from the fringes of the crypto market to center stage.
The reason? Its trading debut on Coinbase (NASDAQ:COIN), as our Brenden Rearick reported the day it happened (Sept. 9). Just before its addition to the popular cryptocurrency trading platform, XYO changed hands for around 2 cents. By the following day, it had soared nearly three-fold, to prices nearing 6 cents.
But despite this stampede of retail traders diving into it in the hopes of getting in early, the XYO token’s surge didn’t last long. According to CoinMarketCap, since hitting its all-time high, XYO has fallen by around 48%.
Much of this sell-off had to do with traders who truly got in early and bought before the Coinbase listing. They flipped their positions to a now more-liquid market. But in recent days, something else has put pressure on this small, speculative altcoin: the overall drop in crypto prices.
As investors shift from a “risk-on” to a “risk-off” mindset, and the specter of regulation looms, don’t expect this bearish sentiment to reverse in the near term. With this, chances are that XYO, despite only becoming widely known a few weeks back, will continue falling back to lower prices.
XYO Network and its Short-Lived Run
It’s no surprise XYO Network took off like it did earlier this month. Getting a Coinbase listing basically put it on the map. But while it was a boon for those who got bought early, it hasn’t been so swell for speculators who jumped in after its sole near-term catalyst started to play out.
Outside of its above-mentioned listing, there’s little in play that will help XYO surge in price in the coming weeks or months. That is, when it comes to it possibly increasing in price due to its utility, the jury’s still out.
So, what exactly is the purpose of the token’s network? Similar to other smaller cryptos, XYO focuses on a niche area (geospatial data). Through its Sentinel network of physical devices, this platform can be used for purposes such as the tracking of physical goods. The network’s developer lists many use cases. These include usage of it to independently track airline luggage, medical equipment and rental cars.
Yet while it’s locked down scores of partnerships, and has a well-defined purpose, it may be too early to say it’s ready for prime time. Especially given how XYO itself has so provided limited information about how its ERC-20 token, which runs on Ethereum (CCC:ETH-USD), even works. With this, speculation is going to be it’s sole driver in the near term.
That wouldn’t be a bad thing if crypto looks primed to stay in bull market mode. Yet now, as recent events suggest its overall pullback could continue, it may not be worth it to dive in now.
XYO Could Drift Lower
Cryptocurrencies made an solid comeback between late July and early September. For instance, Bitcoin (CCC:BTC-USD) partially recovered. Ethereum made it close to its all-time high, thanks to its implementation of updates. Another major altcoin, Cardano (CCC:ADA-USD), hit new highs, thanks to its own upgrade catalyst.
But now, this is no longer the case. High levels of uncertainty in the financial markets, coupled with the U.S. moving closer to regulating the crypto market, have pushed coin/token prices lower across the board. Worse yet, this could carry on in the months ahead. If the Federal Reserve sticks to its plan to reverse its Covid 19-era monetary policies, riskier assets overall, including crypto, could continue to fall in price.
Further moves from Washington to give it regulatory control over crypto will likely sink digital assets to lower prices. On the surface, it may appear the goal of regulation is to protect investors. Yet crypto market participants may adopt the more cynical view of it, that moves to regulate it are really moves to prevent it from fully disrupting the existing financial system.
What does this have to do with XYO Network? If the major coins take a further dive, expect this one to do so as well. Along with holders of it from before the Coinbase listing realizing their gains, it’ll likely continue to give up its recent gains.
Too Early to Buy, So Hold Off For Now
In time, factors specific to its blockchain could help move the needle for this token. For example, wider adoption of its geospatial tracking system. But for now, XYO to move in tandem with the overall market.
There’s no need to buy XYO right now, as it has more room to fall before it bottoms out.
On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.