Altcoins See Massive Inflows Amid Bitcoin’s Record Rally, But 2021 Bubble Warnings Persist
Altcoins are starting to outperform Bitcoin (BTC) amid a surge in cryptocurrency prices, a notable shift from 2021’s all-time highs. The surge coincides with Bitcoin approaching An all-time high of $100,000Donald Trump won the presidential election, positioning himself as a pro-cryptocurrency leader.
However, Bloomberg Report The uncertainty surrounding the 2021 cryptocurrency crash remains evident among investors, as many altcoins have experienced wild price swings during past market cycles.
Experts cast doubt on altcoin rally
Altcoin gains have been impressive, with tokens like Solana (SOL) hitting all-time highs while many others have more than doubled in price since the start of the year.
Historically, altcoins have tended to outperform other currencies Bitcoin During market upswings, it is also possible to experience larger declines during market downturns due to higher volatility and lower trading volumes.
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The crypto market has remained cautious since the collapse of major players such as FTX and crypto lender Celsius, which resulted in a severe bear market. Nonetheless, recent activity has shown signs of recovery, with altcoins seeing increased trading volumes and rising prices throughout November.
Interestingly, James Butterfill, director of research at CoinShares, expressed doubts about a major altcoin rally, especially in light of potential regulatory changes, including a proposed national Bitcoin reserve.
Republican Senator Cynthia Lummis presented Bitcoin Actit seeks to allocate funds from the Federal Reserve’s gold reserves to purchase a strategic reserve of 1 million Bitcoins.
Butterfield told Bloomberg that the political impact of such legislation could significantly impact market dynamics, potentially increasing Bitcoin’s dominance relative to its peers.
Hopes of ETF approval could boost cryptocurrency interest under Trump
Although Solana is the only major altcoin to break above previous highs this year, experts such as Nikolay Karpenko from cryptocurrency trading firm B2C2 believe that this rally may be different from the 2021 experience.
The expert highlighted the maturity of the industry over the past few years, with improved risk management and “more strategic” institutional investors entering the cryptocurrency space.
As altcoins continue to gain traction, data shows trading volume Increasing concentration among the five most traded altcoins has increased from less than 50% earlier this year to over 60% this month.
This shift can be attributed to unique factors affecting individual cryptocurrencies, such as excitement about potential driving Solana’s rise exchange traded funds (ETF) approval and Dogecoin’s gains are tied to its affordability and support from figures like Elon Musk and his new position at the Department of Government Efficiency (DOGE).
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The expert noted that the likelihood of more altcoins receiving ETF approval may further increase under the Trump administration institutional interests. However, Butterfield warned that the market may start to differentiate between assets and focus more on fundamentals rather than riding the wave of speculative trading.
Despite bullish sentiment toward altcoins, they still trade at a significant discount to Bitcoin, with the second-largest cryptocurrency, Ethereum (ETH), trading at only about 4% of Bitcoin’s value.
After hitting a new record high of $263 during last week’s rally, Solana has fallen back to $240 levels, echoing the current correction Bitcoin is experiencing after hitting a new all-time high of $99,500. As of writing, SOL is up nearly 6% in 24 hours, while BTC is up 4% in the same period.
Cover image from Dall-E, chart from Tradingview
