The cryptocurrency market is experiencing a significant shift as altcoins start to outperform Bitcoin (BTC), a development not seen since the monumental highs of 2021. This trend is emerging alongside Bitcoin’s approach towards an all-time high of $100,000, a movement energized by Donald Trump’s presidential election win, where he advocates strongly for pro-crypto policies.
Persistent Market Uncertainty and Altcoin Volatility
Despite this bullish momentum, Bloomberg highlights that the echoes of the 2021 crypto market collapse still resonate with investors. Many altcoins underwent severe price swings during previous market cycles, fueling caution among traders.
Expert Voices Skepticism On Altcoins Rally
In recent months, altcoins have demonstrated remarkable gains, with tokens such as Solana (SOL) hitting new all-time highs. Numerous other altcoins have doubled in price since the year’s start. Historically, altcoins have outperformed Bitcoin during market rallies but tend to suffer more drastic declines in bear markets due to their inherent volatility and lower trading volumes.
The crypto market has been treading carefully after significant entities like FTX and crypto lender Celsius faced collapses, leading to a pronounced bear market. However, current trends suggest a revival, as indicated by rising trading volumes and price increases among altcoins throughout November.
James Butterfill, head of research at CoinShares, expressed skepticism about a full-scale altcoin rally. He pointed to potential regulatory changes, such as a proposed national Bitcoin reserve, as a factor that could influence market dynamics. Republican Senator Cynthia Lummis has put forth the Bitcoin Act, aiming to divert funds from the Federal Reserve’s gold reserves to build a strategic stockpile of 1 million Bitcoin. Butterfill noted that such legislation could significantly alter market dynamics, possibly boosting Bitcoin’s dominance in the crypto space.
ETF Approval Hopes Could Boost Crypto Interest Under Trump
While Solana stands out as a major altcoin surpassing its previous highs this year, industry experts, including Nikolay Karpenko from crypto trading firm B2C2, suggest this rally might be distinct from the 2021 experience. The expert emphasized the industry’s evolution over recent years, highlighting improved risk management strategies and the entry of more strategic institutional investors into the crypto domain.
As altcoins gain momentum, trading volume data reveals a growing concentration among the five most traded altcoins, which now account for over 60% of market activity, up from less than 50% earlier this year. This change is driven by unique factors impacting individual cryptocurrencies. Solana’s rise, for instance, is fueled by optimism surrounding potential exchange-traded fund (ETF) approvals, while Dogecoin benefits from its payment capabilities and support from influential figures like Elon Musk, who recently assumed a new role at the Department of Government Efficiency (DOGE).
The prospect of more altcoins receiving ETF approvals under Trump’s administration could further amplify institutional interest. However, Butterfill warned that market participants might start to differentiate between assets, focusing more on intrinsic value rather than speculative trading trends.
Despite the optimism surrounding altcoins, they continue to trade at significantly lower prices compared to Bitcoin. Ethereum (ETH), the second-largest cryptocurrency, is valued at approximately 4% of Bitcoin’s price.
After reaching a new record high of $263 during last week’s rally, Solana’s price has receded to the $240 level, mirroring Bitcoin’s correction after hitting a new all-time high of $99,500. As of now, SOL has risen nearly 6% within the past 24 hours, while BTC has increased by 4% during the same period.
