Altcoins surged this week after trailing Bitcoin’s recent surge to new highs in 2023. Bitcoin reached an 18-month high and Ethereum broke through the key psychological mark of $2,000 for the first time since April. Other cryptos saw bigger gains; Solana went up 40%, Polygon’s MATIC token gained 25%, and Cardano’s ADA rose 17%. Bitcoin and Ethereum rose 8% and 15%, respectively.
Rob Ginsberg, an analyst at Wolfe Research, commented on the situation, “The crypto space has largely been a one-man show over the past year. Bitcoin has led the charge to the upside, while ETH and altcoins couldn’t catch a bid. That is no longer the case as altcoins across the board joined in Bitcoin’s rally over the past two weeks.”
Traders are now watching to see if the gains will hold or if this is just a temporary moment of risk-on. Ginsberg noted, “Many [altcoins] are deeply overbought, and a part of concerning longer term trends, but the drastic improvement certainly can’t go ignored. Many of the moves are in the ballpark of parabolic, so we’ll be watching to see if a more meaningful regime change is at hand or if they succumb to overbought conditions.”
What sparked this surge in altcoins? It may be down to Bitcoin’s break above $30,000, and the 10-year US Treasury yield falling at the start of November after hitting a 16-year high in late October. High yields can pressure crypto, as with any other risk asset. Bitcoin and Ethereum have been isolated from this trend, as investors appear to be treating them as safe trades compared to smaller, riskier altcoins.
Ryan Rasmussen, analyst at Bitwise Asset Management, remarked that it is normal to see a period where Ethereum and altcoins play catch-up when Bitcoin rallies. He said, “Historically we’ve seen Bitcoin rally, then Ethereum, then alts, and that pattern seems to be repeating as this bull market heats up.”
The possible approval of a Bitcoin ETF is fueling optimism in the market, but it remains to be seen if that can sustain Bitcoin’s new high price before then. Investors seem to think an ETF could be approved in the first half of 2024, although some believe it could be sooner.
JPMorgan’s Nikolaos Panigirtzoglou commented that the current rally fueled by an ETF “seems rather overdone.” He added, “We see as a more likely scenario existing capital shifting from existing Bitcoin products such as the Grayscale Bitcoin Trust, Bitcoin Futures ETFs and publicly listed Bitcoin mining companies, into the newly-approved spot Bitcoin ETFs.”
Panigirtzoglou also touched on the upcoming Bitcoin halving, which is designed to reduce the supply of the cryptocurrency and is typically the beginning of the next big bull run in crypto. He said, “This argument seems unconvincing as the Bitcoin halving event and its effect are predictable and in our opinion are well factored into Bitcoin price.”
CNBC’s Michael Bloom contributed reporting.