Following the Federal Reserve’s decision on interest rates, altcoins have outperformed Bitcoin (BTC) and Ethereum (ETH) in terms of market gains. While Bitcoin saw a modest rise, altcoins emerged as the top winners in the cryptocurrency market.
On Wednesday, the Federal Reserve announced a 50 basis point cut in the Federal Funds rate, and altcoins quickly surged past Bitcoin and Ethereum in response.
According to TradingView data, the Total3 Index, which tracks the market capitalization of the top 125 cryptocurrencies excluding Bitcoin and Ethereum, has gained 5.68% since the rate cut. In contrast, Bitcoin’s market capitalization increased by only 4.4%.
Why Are Altcoins Surging?
Bob Wallden, Head of Trading at investment firm Abra, stated that this trend is not surprising. “Altcoins are higher beta than Bitcoin and ETH. So, think of them as leveraged plays on the broader crypto market, similar to how tech stocks outperform the S&P 500 during periods of market growth,” Wallden explained.
Altcoins, which represent all cryptocurrencies excluding Bitcoin and Ethereum, have likely gained momentum due to an oversold market, leading to a strong recovery. Bohan Jiang, Head of OTC Options Trading at Abra, pointed out that the low liquidity levels in this asset class contribute to increased volatility.
Jiang remarked, “Altcoins sit at the fringes of the liquidity spectrum, so when risk assets do well and liquidity is abundant, they tend to outperform more dramatically. This seems to be the case following the Federal Open Market Committee (FOMC) meeting.” He also noted that the recent illiquidity and extended short positions in the altcoin market likely triggered outsized gains, similar to a “short-squeeze” effect.
The Bigger Picture
As liquidity continues to flow back into the market, analysts expect altcoins to maintain their momentum, presenting potential opportunities for investors. With a lower liquidity environment, however, volatility is expected to remain elevated. The gains in altcoins after the FED’s decision could signal a continued shift in focus away from Bitcoin and Ethereum as investors seek higher returns from smaller cryptocurrencies.
For more updates on this developing trend, follow Deythere.
Altcoins, Bitcoin, Ethereum, market gains, Federal Reserve
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