As Bitcoin and Ether prices pull back from their recent highs, the strong performance of other cryptocurrencies suggests that traders and investors may now turn to alternative coins (altcoins) for potentially high returns.
Data compiled by CoinDesk Research shows that prices for Bitcoin and Ether were around 87% and 78%, respectively, of their all-time highs on Jan. 11. However, other CoinDesk 20 assets were still far from their highest registered prices. One possible implication is that these tokens may still have the potential to reach higher price levels while the recent Bitcoin bull run takes place.
“We’ve seen [altcoins] Pump – before and after [Monday’s] Correction – in a way we haven’t really seen since 2017, ”said Andrew Tu, an executive at quantitative firm Efficient Frontier.
Bitcoin’s market capitalization hit a new record high on January 8, but has fallen since then. This shows that, according to Tu, some traders may be taking profits from Bitcoin and plowing those into altcoins.
As CoinDesk previously reported, after the institution-driven Bitcoin bull run in 2020, retail investors and traders joined the rally to “be afraid of missing out”. Some newbies looking at Bitcoin’s highly numbered trading price – without realizing that it can be bought in tiny fractions – take altcoins because their relatively low price makes them seem affordable
An example seems to be the recent double-digit gains in XRP. A seemingly inexplicable rally hit the news shortly after the price plummeted. The US Securities and Exchange Commission filed a lawsuit against Ripple Inc. claiming the company sold the token as collateral.
Tu told Token that the popular decentralized finance subsector of the crypto space had a particularly strong performance.
The prices for Synthetix (SNX), a token for a decentralized trading platform for minting and exchanging synthetic tokens that reflect the price of other assets, hit a new all-time high of around $ 16.01 on Tuesday. At press time, it was trading at $ 14.78 in 24 hours, according to Messari, up 28.54%.
Other key DeFi tokens have shown robust growth, including Maker (MKR), Compound (COMP), Aave (AAVE), and Uniswap (UNI), as Messari’s DeFi Assets Tracker shows.
However, in the latest weekly market report from Arcane Research on Jan. 12, the Norwegian crypto research firm warned of the risk of such “altcoins betting”.
“It’s safe to say that the rally in Bitcoin has reached altcoins as altcoins have seen extreme returns over the past week,” the report said. “As bitcoin went down on Sunday and Monday, altcoins followed with more anger, confirming that altcoin moves are based on a risk-on approach.”