Bitcoin Is Skyrocketing. Now Traders Are Looking At These Altcoins

On Tuesday at 9:55 am, bitcoin surpassed $69,000 for the first time in its tortured 15-year history. The milestone comes 848 days after its previous peak on November 8, 2021. During the ensuing months and years, the industry dealt with a harsh bear market that caused the asset’s price to drop by more than 80%, leading to more than $2 trillion in value being wiped out from the total crypto market.

Today, bitcoin’s price is being buffeted by ten spot exchange-traded funds (ETFs) offered by the likes of BlackRock
BLK
, Fidelity and Invesco
IVZ
, which have collectively brought in more than $7.5 billion in new money to crypto.

“Bitcoin
BTC
has bear and bull cycles that are idiosyncratic with the rest of the market,” says Nathan McCauley, CEO and cofounder of crypto custodian Anchorage Digital. “Many people who may have been interested in taking a position in bitcoin over the last decade were unable to until the ETFs came out.”

Bitcoin’s surge begs an important question for investors: Will this remain a bitcoin story, or will other digital assets or so-called “use cases” rise to the forefront? The crypto bulls are hoping that the market will soon transition to another “alt-season.” This occurs when investors roll profits made from core crypto assets such as bitcoin and ethereum into more speculative tokens like solana, celestia and chainlink, with increased levels of volatility but potentially higher gains.

In 2017, funds moved from bitcoin into ethereum and other all-in-one blockchain platforms such as Cardano
ADA
and Polkadot
DOT
. During the Covid surge in 2021 money moved into NFTs and even more speculative decentralized finance tokens such as uniswap, compound and aave. In fact, these DeFi tokens, rose by an average of almost 600% during the first stretch of the Covid bull run from August 2020-May 2021. Bitcoin increased by nearly 470% over the same period.

When crypto euphoria spreads beyond bitcoin, investors tend to pay attention to a metric known as bitcoin dominance, which measures the percentage of the total crypto market capitalization made up by bitcoin. This figure has hovered around 50% since the ICO boom of 2017, but when demand heats up for alternative tokens, it can fall to below 40% as it did in January 2022, a few months before the collapse of blockchain Terra
LUNA
and its stablecoin luna sparked a crypto crash. Currently, the bitcoin dominance level is holding steady at 53%.

“The technology tokens are underappreciated right now,” says Kavita Gupta, founder of the $120 million Delta Blockchain Fund, which invests in early-stage crypto companies. “Ethereum
ETH

ETH
, solana
SOL
and polygon
MATIC
have rallied some, but they are nowhere near their all-time highs.” In the last three months, ethereum is up 60%, while ethereum blockchain clone solana has nearly doubled in price. Polygon, which allows developers to build multiple blockchains from ethereum, has gained about 33%. Other altcoins that have rallied include, immutableX, a blockchain platform focused on gaming applications, which is up 118% since late December, and avalanche, an ethereum competitor that is making strong inroads in putting real world assets on blockchain. This token is up 63% in the last three months.

Despite these gains, overall crypto valuations are still below 2021’s euphoric highs. For comparison, in November 2021 the entire crypto token ecosystem was worth $3 trillion, today it is less than $2.5 trillion. And despite crypto’s drubbing since early 2022, the number of digital assets has expanded. Today there are 13,000 tokens trading compared to 5,600 at the peak of the market.

Nico Cordeiro, chief investment officer at the $50 million crypto hedge fund Strix Leviathan, is sitting on a portfolio brimming with speculative altcoins. “We expect to see another big alt-run,” enthuses Cordeiro. “Bitcoin ETFs are a big driver of this price movement, but crypto is much wider than just bitcoin and ether.” One area Cordeiro finds particularly interesting is platforms that let users move tokens between blockchains. This is especially useful for developers who do not want to be siloed into one specific chain. It is far more efficient to build one application that can run on multiple blockchain platforms simultaneously. Interoperability protocols provide that connective tissue. For example, decentralized exchange Uniswap
UNI
uses these tools to branch its platform from Ethereum to…