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Analysts Discuss the Risks of Buying Altcoins Today

Published

7 months ago

June 16, 2024

Coin2049 Newsletter

The cryptocurrency market has seen significant changes, leading many analysts to caution against investing in altcoins.

Historically, bull markets have seen Bitcoin and Ethereum rise first, followed by altcoins. However, current conditions suggest a shift in this pattern.

Why Buying Altcoins Now Is Risky

Quinn Thompson, founder of the crypto hedge fund Lekker Capital, advised against investing in altcoins at this time. He pointed to several indicators of market instability, including high leverage and open interest, a lack of panic-driven buying, and stagnant stablecoin supply.

He believes the market is experiencing increased selling pressure, particularly from venture capital funds needing to raise capital, which leads to more selling than buying. This situation, combined with low summer trading volumes, makes it difficult for altcoins to gain traction.

“I think there is serious cascade risk in crypto, and in particular, expect most altcoins to be taken out back. The market seems to have lost any ability to bounce, even in majors, while at the same time, leverage and open interest remains high,” Thompson said.

Thompson identified two primary reasons for his stance. First, the impact of Bitcoin and Ethereum exchange-traded funds (ETFs) and the issue of altcoin supply inflation.

The introduction of Bitcoin and Ethereum ETFs has changed the market structure. In the past, capital would flow from major cryptocurrencies like Bitcoin and Ethereum into altcoins during bull markets. However, with over $50 billion now invested in Bitcoin ETFs, these funds do not have similar mechanisms for investing in altcoins.

This shift has limited the capital available to altcoins, making it harder for them to rise in value. According to Samara Epstein Cohen, Chief Investment Officer of ETF at BlackRock, traditional market participants increasingly focus on Ethereum for tokenization, which further sidelines altcoins.

Bitcoin ETFs Holdings. Source: CryptoQuant

The rapid launch of new altcoins has also flooded the market, creating significant inflationary pressure. Many projects release large amounts of tokens aggressively, resulting in a supply that far exceeds demand.

Thompson pointed out that there is a lack of demand to support the approximately $3 billion of monthly altcoin supply inflation expected over the next one to two years. While some altcoins may still perform well, identifying these successful tokens will be more challenging than in previous years.

“Altcoins have a constant stream of sell pressure. As we enter an already low-volume summer period, the combination of significant token supply unlocks and venture capitalists’ sell pressure will likely be too strong of an uphill battle for most tokens,” Thompson concluded.

Meanwhile, Will Clemente, co-founder of Reflexivity Research, reflected on how the market has matured. In 2020, investing in high-beta altcoins was a profitable strategy as these assets outperformed Bitcoin. However, this approach is no longer effective.

Many altcoins have underperformed Bitcoin in recent months, indicating that the market dynamics have changed.

“In 2020, you go out on the risk spectrum, those things are going to have higher beta to Bitcoin and you just get long all the vaporware and all that stuff goes up. We have not seen that this time. A lot of the altcoin to Bitcoin pairs have just been bleeding out for several months now and it hasn’t really been as simple as just buy whatever vaporware altcoin and you’ll outperform Bitcoin,” Clemente emphasized.

Technical analyst Michaël van de Poppe highlighted that Bitcoin is near or at an all-time high, while most altcoins have not reached their previous peaks. This discrepancy indicates a lack of confidence in altcoins, which continue to struggle in the current market environment, suggesting that the days of easy gains from altcoins may be covered.

Read more: 10 Best Altcoin Exchanges In 2024

Investors should be aware of the heightened risks and consider new conditions before making decisions in the cryptocurrency market.

Disclaimer

In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.

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Market

Will It Smash Another ATH?

Published

37 minutes ago

January 22, 2025

Coin2049 Newsletter

Este artículo también está disponible en español.

Bitcoin price started a fresh increase above the $104,000 zone. BTC is consolidating above $105,000 and might aim for a new all-time high.

Bitcoin started a decent increase above the $102,500 resistance zone.
The price is trading above $104,500 and the 100 hourly Simple moving average.
There was a break above a connecting bearish trend line with resistance at $104,000 on the hourly chart of the BTC/USD pair (data feed from Kraken).
The pair could start another increase if it stays above the $103,500 support zone.

Bitcoin Price Regains Traction

Bitcoin price started a decent upward move above the $102,500 zone. BTC was able to climb above the $103,500 and $104,000 levels.

The bulls even pushed the price above the $105,000 level. Besides, there was a break above a connecting bearish trend line with resistance at $104,000 on the hourly chart of the BTC/USD pair. The pair surpassed the 50% Fib retracement level of the downward move from the $109,112 swing high to the $100,114 low.

Bitcoin price is now trading above $104,500 and the 100 hourly Simple moving average. On the upside, immediate resistance is near the $107,000 level. It is close to the 76.4% Fib retracement level of the downward move from the $109,112 swing high to the $100,114 low.

The first key resistance is near the $107,500 level. A clear move above the $107,500 resistance might send the price higher. The next key resistance could be $109,000.

A close above the $109,000 resistance might send the price further higher. In the stated case, the price could rise and test the $110,000 resistance level and a new all-time high. Any more gains might send the price toward the $112,500 level.

Downside Correction In BTC?

If Bitcoin fails to rise above the $107,000 resistance zone, it could start a downside correction. Immediate support on the downside is near the $104,500 level. The first major support is near the $103,500 level.

The next support is now near the $102,800 zone. Any more losses might send the price toward the $100,500 support in the near term.

Technical indicators:

Hourly MACD – The MACD is now gaining pace in the bullish zone.

Hourly RSI (Relative Strength Index) – The RSI for BTC/USD is now above the 50 level.

Major Support Levels – $104,500, followed by $103,500.

Major Resistance Levels – $107,000 and $108,500.

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Market

Trump’s $500 Billion Stargate Venture Sparks AI Crypto Boom

Published

2 hours ago

January 22, 2025

Coin2049 Newsletter

AI tokens surged on Wednesday after President Donald Trump unveiled a new joint venture to invest up to $500 billion in artificial intelligence infrastructure.

The partnership involves major players such as OpenAI, Oracle, and SoftBank and will form a new entity called Stargate.

Market Focuses on AI Coins as Trump’s Stargate Initiative Gains Traction

The Stargate Project will invest $500 billion over the next four years, building new AI infrastructure in the US. The venture will focus on developing crucial data centers and the electricity generation required to power the AI sector.

The announcement has already had a noticeable impact on the broader market, particularly in AI-related cryptocurrencies. Following the news, the market capitalization of AI tokens surged by 9%, reaching $45.83 billion at press time, according to CoinGecko.

In fact, the market cap of AI agent tokens alone rose by 13% to hit $14.9 billion.

AI agent tokens, such as Virtuals Protocol, AIXBT, and AI16Z, saw impressive gains. Virtuals Protocol rose by over 13% in the past 24 hours, while AI16Z experienced a remarkable 36% increase. AIXBT token rose by 27% over the same period.

The surge in AI tokens reflects a broader shift in market interest as investors move capital towards more “sentient” tokens.

“Capital is rotating back from static memes to sentient coins,” AI researcher S4mmy commented on Twitter.

The analyst added that Fartcoin and AIXBT are sustaining their “mindshare dominance,” but face declining market caps after a heated run. Commenting on Virtuals Protocol, he said it continues to solidify its position as a backbone of the Agentic infrastructure.

Moreover, analyst CyrilXBT said he believes “AI will create generational wealth in 2025.”

“People said Bitcoin was a joke. People said AI agents are a gimmick. Guess what else they’ll say? ‘Why didn’t I listen when generational wealth was staring me in the face?,” CyrilXBT commented.

The shift towards AI is particularly interesting, given the trend of investments a few days back. Capital was flowing into Donald Trump-related tokens, such as TRUMP and MELANIA, which have seen significant volatility.

However, BeInCrypto reported that smart money traders are now focusing on AI tokens after the hype around TRUMP faded. According to data from Nansen, a substantial amount of VIRTUAL, FARTCOIN, and AIXBT tokens are held by smart money.

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Market

Will an Upside Break Spark a Surge?

Published

3 hours ago

January 22, 2025

Coin2049 Newsletter

Este artículo también está disponible en español.

Ethereum price is struggling below the $3,500 resistance while Bitcoin gains. ETH is consolidating above $3,150 and might aim for an upside break.

Ethereum failed to gain pace for a close above $3,400 and $3,450.
The price is trading above $3,300 and the 100-hourly Simple Moving Average.
There is a key contracting triangle forming with resistance at $3,355 on the hourly chart of ETH/USD (data feed via Kraken).
The pair could start another increase if it clears the $3,400 resistance level.

Ethereum Price Aims Key Upside Break

Ethereum price started a decent upward move from the $3,200 level but upsides were limited compared to Bitcoin. ETH cleared the $3,250 resistance to move into a short-term bullish zone.

The bulls were able to push the price above the $3,300 resistance zone. Besides, there was a clear move above the 50% Fib retracement level of the downward move from the $3,445 swing high to the $3,203 low. However, the bears are still active below $3,400.

Ethereum price is now trading above $3,300 and the 100-hourly Simple Moving Average. On the upside, the price seems to be facing hurdles near the $3,350 level or the 61.8% Fib retracement level of the downward move from the $3,445 swing high to the $3,203 low.

There is also a key contracting triangle forming with resistance at $3,355 on the hourly chart of ETH/USD. The first major resistance is near the $3,400 level. The main resistance is now forming near $3,445.

A clear move above the $3,445 resistance might send the price toward the $3,550 resistance. An upside break above the $3,550 resistance might call for more gains in the coming sessions. In the stated case, Ether could rise toward the $3,650 resistance zone or even $3,720 in the near term.

Another Decline In ETH?

If Ethereum fails to clear the $3,400 resistance, it could start another decline. Initial support on the downside is near the $3,300 level. The first major support sits near the $3,250.

A clear move below the $3,250 support might push the price toward the $3,200 support. Any more losses might send the price toward the $3,120 support level in the near term. The next key support sits at $3,050.

Technical Indicators

Hourly MACD – The MACD for ETH/USD is losing momentum in the bullish zone.

Hourly RSI – The RSI for ETH/USD is now above the 50 zone.

Major Support Level – $3,200

Major Resistance Level – $3,400

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