While Bitcoin (BTC) has demonstrated strong performance following the Federal Reserve’s interest rate cut, altcoins have emerged as the real winners in the cryptocurrency market.
Total3, an index tracking the top 125 cryptocurrencies excluding Bitcoin and Ether (ETH), has surged by 5.68% since the central bank’s announcement of a 50 basis point rate reduction. In contrast, Bitcoin’s market capitalization has only increased by 4.4%.
Bob Wallden, head of trading at Abra, explained that this outperformance is not surprising. “Altcoins are higher beta than Bitcoin and Ether, making them a leveraged play on the broader crypto market similar to tech stocks outperforming the S&P 500 during periods of economic growth,” he stated.
Additionally, Wallden suggested that recent oversold conditions in the altcoin market may have contributed to their rapid rebound. The relatively low liquidity levels of altcoins can amplify their price movements, leading to greater volatility.
Bohan Jiang, Head of OTC options trading at Abra, further emphasized the impact of liquidity on altcoin performance. “Altcoins have substantially poorer liquidity, causing outsized moves in both directions,” he said. “Extended short positioning can lead to short-squeeze-like outperformance.”
