Altcoins Surge Leaving Bitcoin and Ether Behind After Fed Cuts Interest Rate
- DDDOriginal
- 2024-09-21 06:02:37504browse
The market cap of altcoins rose 5.7% after the central bank announced it would lower interest rates by 50 basis points. Bitcoin's market cap rose only 4.4%.
Altcoins outperformed bitcoin and ether on Thursday after the Federal Reserve announced another interest rate hike, continuing a trend that began last month.
Total3, an index that tracks the market capitalization of the top 125 cryptocurrencies, excluding bitcoin and ether, rose 5.68% after the central bank announced it would increase the Federal Funds rate by 50 basis points, according to TradingView. Bitcoin’s market cap, on the other hand, rose only 4.4%.
This outperformance is largely due to the fact that altcoins are more volatile and higher beta than bitcoin and ether, said Bob Wallden, head of trading at Abra.
“Think of them as a leveraged play on the broader crypto market. Similar to how tech stocks outperformed the S&P 500 in time of green shoots.”
The asset class, which includes all crypto assets besides bitcoin and ether, might have also benefited from a recent period of overselling, which is adding velocity to their bounce back, Wallden added.
The relative illiquidity of altcoins also contributes to their outsized performance, said Bohan Jiang, Head of OTC options trading at Abra.
“Altcoins are at the fringes of the liquidity spectrum, and so will always be ‘convex’ in performance when risk assets perform well and liquidity is abundant, which seems to be the case post-FOMC.”
“They also perform as a function of liquidity and positioning: liquidity in alts is substantially poorer, causing outsized moves both ways. Extended short positioning building up over the past few months can therefore cause ‘short-squeeze’-like outperformance higher.”
Bitcoin rose to $62,898 after the Fed announcement, up from $64,000 on Thursday.
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