The cryptocurrency market has been experiencing a significant rise in recent months, led by Bitcoin. This rise turned investors’ attention from Bitcoin to altcoins. So, has the altcoin season started early? In this article, we will examine the possible reasons for the altcoin season and what to consider before investing.
Has the altcoin season started early?
cryptokoin.com As we reported, the cryptocurrency market has been experiencing a rally lately with the rise of Bitcoin. Bitcoin’s rise of more than 300% since the November 2022 lows has turned investors’ attention to altcoins. So, has the altcoin season started early?
According to Bitwise Chief Investment Officer (CIO) Matt Hougan, the main driving force behind the early start to the altcoin season is a classic “wealth effect.” Investors who make money in Bitcoin feel rich and then look for more speculative assets, namely altcoins, to invest in.
What is the significance of the wealth effect?
Hougan believes the catalyst for the altcoin season is not Bitcoin’s percentage return but the cumulative magnitude of its wealth impact. Since the November 2022 lows, Bitcoin’s market cap has increased by $1 trillion, creating more wealth than in previous cycles. This wealth encourages some Bitcoin investors to move into altcoins.
His statements include the demonstration of significantly improved technology infrastructure for altcoins compared to past cycles as an additional catalyst for the altcoin season. Developments such as the Dencun update in Ethereum and the rise of layer 2s increase the usage areas and potential of altcoins.
The bull market will not end early
Hougan does not think the bull market or altcoin season will end early. While historically Bitcoin’s rise has been capped when marginal capital flows from Bitcoin into altcoins, the 2024 rally is being driven by new money entering the ecosystem via ETFs. This shows that the “wealth effect” may continue for a while, and this time there may be an “everything season” instead of an “altcoin season”.
Hougan’s views are shared by other cryptocurrency experts. James Butterfill, Director of Digital Asset Funds Research at CoinShares, says altcoins have more rally potential than Bitcoin. “Bitcoin dominance is currently under 40%, which means a huge opportunity for altcoins,” says Butterfill.
However, as always, the cryptocurrency market is highly volatile and risky. It is important to do detailed research and consider the risks before investing in altcoins. “Did altcoin season start early?” There is no definitive answer to the question. However, factors such as the rise of Bitcoin, increasing wealth impact and advanced technology infrastructure may cause altcoins to attract more attention in the coming period. It is important to do detailed research and consider the risks before investing.
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