Cryptocurrencies have made a sharp comeback, with top-notch tokens leading the way. However, alternative coins have outperformed leaders like Bitcoin and Ethereum in the past one week, thanks to a catch-up rally.
Edul Patel, CEO & co-founder, Mudrex, said the rally in altcoins has reduced the dominance of Bitcoin, whose market cap was now at 45 per cent of the total crypto market cap. “If we look at an indicator called the Money Flow Index, we see that the volume and money flow into most of the top altcoins has gone significantly up. It is because of the growth potential of these smaller altcoins.”
After the London Hard Fork update, there was a rally in Bitcoin and Ethereum, leading to a breakout for the entire market following a prolonged consolidation. The major digital currencies have gained 9-12 per cent in the past week.
On the other hand, altcoins such as IoTeX have rallied over 320 per cent in the last seven days. Revain and Terra have soared 78 per cent and 62 per cent, respectively. Among the popular names, Solana, Axie Infinity, Cadano, XRP and Dogecoin have jumped 40-65 per cent during the period.
Sharan Nair, Chief Business Officer at CoinSwitch Kuber, said cryptocurrencies were still at a nascent stage. There was still a huge potential for new entrant coins to make an impact. “Most investors are on the lookout for new coins that they believe will radically change the ecosystem and they want to invest in them at early stages and benefit from it, like what investors did in bitcoin and ether,” he added.
Investors who flock to cryptocurrencies for attractive returns said crypto behemoths like Bitcoin and Ethereum do not have much steam left. This has made many altcoins scale higher in the market cap chart. “Adoption leads to demand, which drives prices significantly higher,” said Patel. “In the coming months, we would see these smaller altcoins gain adoption as well as market capitalisation.”
For example, Binance Coin and Cardano are now the third and fourth largest cryptocurrencies, respectively. Similarly, Solana is now on the verge of entering the top 10 table. Axie Infinity has joined the top 35. “The market seems to be bullish and, in general, we have seen such a market bringing in new crypto investors, many of whom try to invest more in new coins,” said Nair.
Market watchers said investors were now more inclined towards altcoins, instead of mainstream tokens, as they were aiming to make an early entry into new crypto projects with promise and potential. “The new projects are undervalued and once its potential is exposed, it will draw a lot of traction and will lead to an increase in price,” Nair of CoinSwitchKuber said.
Analysts suggested that investors were not willing to put all their eggs in one basket. Prudent investors prefer to diversify their portfolios.
Several retail investors come to the crypto markets to make quick gains and only invest in the smaller altcoins, many of which often nosedive.
Some of the smaller altcoins have exciting prospects as they gain adoption from institutional investors and retail investors, said Patel. “The bulk of the investments would still flow into the mainstream tokens instead of smaller altcoins,” he added.
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