Why Kaspa Plunged 17% This Past Week

One cryptocurrency I haven't discussed much, but which has made significant headlines lately, is Kaspa (CRYPTO: KAS). Unfortunately, this past week's price action in Kaspa, which saw this token decline 17.5% over the past seven days as of 10:00 a.m. ET, has many investors questioning whether this is a top-100 crypto project by market capitalization to invest in.

This layer-1 network, purpose-built for scalability via its GHOSTDAG protocol, enables Kaspa to process parallel blocks, which are ordered using this underlying technology, ultimately scaling to more than 100 blocks per second. Additionally, Kaspa's Crescendo upgrade, implemented earlier this year, increased its transaction speed while maintaining stability. That turned out to be a significant catalyst for investors in May, with Kaspa's native token rallying more than 100% over the course of one month.

With that said, this decline is notable and warrants further examination. Here's the key factor driving investor concern in this large-cap network today, and what to make of Kaspa's investment thesis moving forward.

A key piece of infrastructure is going away...but is it?

Source: Getty Images.

This past week, Kaspa's solo developer (a risk in and of itself) sent out a message to the community that the Kaspa Explorer kas.fyi would be shut down. This is a project that Kaspa's only developer had funded out of pocket for roughly three years, and became an essential tool used by many within the Kaspa ecosystem (users and developers) to track transaction flows, block formation, and overall network metrics.

Like the Federal Reserve flying blind without its key tools needed to enact effective monetary policy (due to the government shutdown), investors clearly don't like the idea of flying blind on their preferred blockchain network. Can't blame them.

That said, others in the Kaspa development community have stepped up to note that funding will be provided moving forward. However, financial troubles appear to be the cause of this abrupt announcement.

This is undoubtedly a discouraging development for long-term Kaspa bulls, and could signal significant underlying stress in terms of the development needed behind the scenes to bring about the sort of innovation and growth necessary to compete with other top projects. In my view, this significant weekly decline could be suggestive of a broader and more protracted downside in the months to come.

Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.