According to experts, this outperformance of smaller-cap, higher-risk cryptocurrencies reflects a rotation of capital out of BTC and ETH, typical investor behavior during cryptocurrency bull markets.
The cryptocurrency market continues its unstoppable march, with the Bitcoin (BTC) staying around 35,000 Dollars in the last 24 hours, while Ethereum (ETH) is approaching $1,900reaching levels not seen since last July.
What is particularly interesting these days is the impressive performance of ‘altcoins’, that have surpassed the two main cryptocurrencies in terms of growth. For example, XRP is experiencing a sharp rise after Ripple Labs obtained regulatory approvals in Dubai and Georgia. The cryptocurrency Solana (SOL), which registered a significant drop the day before, is recovering ground, and other cryptocurrencies such as Dogecoin (DOGE) and Cardano (ADA) are also performing well.
According to experts, this superior performance of smaller capitalization and higher risk cryptocurrencies reflects a capital rotation from BTC and ETHa typical behavior of investors during cryptocurrency bull markets.
According to analysts, cryptocurrency cycles have historically followed a pattern in which Bitcoin leads the first price increase, followed by Ethereum, and then capital gradually moves towards smaller cap and riskier investments. This week’s trend suggests that this rotation is beginning, as BTC and ETH maintain a sideways trend, while DeFi and layer 1 alternative cryptocurrencies show a strong rise, according to Lucas Outumuro, research director at IntoTheBlock.
Cryptocurrencies and the Federal Reserve: what will happen to Bitcoin
Likewise, despite the rotation towards higher risk assetscryptocurrency demand appears to be relatively organic and led by spot purchasing. This suggests that although prices may be rising rapidly in the short term, there are signs of sustainable demand driving the cryptocurrency’s bullish trend.
This rotation is reflected in the decline in Bitcoin’s market share, which has fallen to 51% from 54% at the end of October, marking highs of the last two years. This confirms that investors are taking a riskier stance in the cryptocurrency market.
Overall, the cryptocurrency market appears to be entering an “alt season” as market breadth improves and the end of the Federal Reserve (Fed) rate hike cycle is in sight. This creates a more favorable environment for risk assets. According to ByteTreean investment advisory firm, are making significant investments in ‘altcoins’and they note that the cryptocurrency space is catching up.
Source: Ambito
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