Welcome to Distributed Ledger! In this newsletter, MarketWatch’s crypto and markets reporter, Frances Yue, will take you through the latest in the world of cryptocurrency. So let’s dive in and learn more about this exciting and ever-evolving space.
Bitcoin (BTCUSD) has been on a roll, rallying over 150% in 2023, outperforming smaller coins and solidifying its position as the largest cryptocurrency by market capitalization. According to analysts at Pantera Capital, a digital asset investment firm, this trend is likely to continue. But what about altcoins? Will they have a chance to shine in this bull market?
Experts believe that bull cycles in the crypto market have two phases. In the first phase, bitcoin tends to perform better than other crypto assets. However, in the second phase, smaller coins tend to outperform bitcoin. This has been observed in the previous bull cycles as well.
During the initial stages of a crypto rally, investors usually flock to bitcoin, which is the most liquid and widely-offered digital asset. But as the market matures and investors seek higher growth potential, they turn to other coins such as decentralized finance and non-fungible tokens. This was evident in the rise of “altcoins” in 2020 and 2021.
But with the rise of altcoins comes greater risk. The crypto market is still in its infancy, having only started in 2009, and is highly volatile. Smaller cryptocurrencies, in particular, can pose even greater risks. In 2022, multiple crypto projects failed as the Federal Reserve raised interest rates.
Pantera Capital’s team of analysts suggests that the best way to generate alpha in the crypto space is to maintain consistent exposure and invest in altcoins with strong fundamentals and potential for revenue growth. They believe that these projects will outperform bitcoin in the long run, just like how certain stocks outperform the overall market.
In other news, VanEck, a well-known ETF sponsor, has announced that it will be liquidating its Bitcoin Futures Exchange-Traded Fund at the end of the month. This decision comes after the launch of a spot Bitcoin ETF last week, following the Securities and Exchange Commission’s approval of spot bitcoin ETFs for the first time ever.
Investors are now turning to spot products, which offer direct exposure to bitcoin without the costs associated with rolling futures contracts. This could potentially lead to a shift in investor appetite from futures-based products to spot products.
In the past week, bitcoin has fallen by 7.3%, while ether has seen a 2.5% increase, according to CoinDesk data. As always, stay updated with the latest news and trends in the crypto market with MarketWatch.