Altcoin markets attract institutional investors amid Bitcoin and Ethereum dominance
While bitcoin (BTC) and ethereum (ETH) remain the top coins, altcoins continue to attract significant interest from institutional investors, claimed David Duong, head of institutional research at major crypto exchanges Coin base.
Duong participated in a discussion with popular crypto analyst Scott Melker on March 2, as part of an interview panel that also featured the founder of the crypto options trading platform Hxro Dan Gunsberg and the founder of investment advisor Capital of Morgan Creek Mark Yusko.
When discussing the crypto market’s performance over the past year, Duong noted that what he is currently seeing in terms of flows on the exchange from Coinbase’s institutional clients is that,
“55% of this is still on bitcoin and ETH, but that would mean the rest is still on altcoin – so there’s still a lot of attention to what’s going on in the rest of the ecosystem outside of just Bitcoin and Ethereum.”
What we’re currently seeing in the market is much more macro-focused, he added, arguing that people don’t realize that this is “just seasonally a weaker period for a lot of risk assets” because everything is now in an in-between state where, on the one hand , “people have their bonus payments, putting money into their 401(k)”, which are personal retirement accounts in the United States, and on the other side, it’s the time “right before we” get a lot of checks cut for tax season.”
Therefore, Duong said,
“We are in such a weak period, but we are trying to draw conclusions about what is happening with [Federal Reserve] or what happens to other things, the correlation, which by the way comes down between crypto and other risk assets.”
He concluded that, “if anything,” macro conditions for risk assets including crypto are neutral at the moment. He warned, however, that in the second quarter of this year “we are going to hit real debt ceiling issues” when the economy could potentially weaken.
Melker also commented that we have seen “mini-narratives” related to altcoins, but that these seem “much smaller and faster bubbles than the altcoin narratives we used to see in the past,” he said, adding that,
It seems like “this is the old kind of washing machine cycle of crypto-natives just moving in and out of altcoin narratives with no new money coming in.”
It seems very hypercyclical compared to what was seen previously, Duong agreed, adding that we appear to be “moving very quickly [into it] and pretty quickly got out of it.”
As for how new money would enter the space, Yusko argued that it includes people realizing that they have the institutional quality real assets that are uncorrelated, saying that “bitcoin is the most uncorrelated asset I’ve ever seen in my career.”
Spring is here and summer is coming
According to Morgan Creek Capital’s Yusko, it is now indeed crypto spring – but “spring is not summer.” Spring comes with unstable weather: it’s “windy and choppy”, although he admitted he didn’t see “Hurricane Sam” coming, referring to the fall FTX exchange and its founder Sam Bankman-Fried.
Summer is coming, he suggested, especially with the Bitcoin halving approaching, as well as the incoming Ethereum Shanghai fork.
Gunsberg said that looking at the Bitcoin Futures curve, higher prices are on the horizon.
“There’s actually a return that’s being delivered, which we didn’t see for a while. And that for me, and I’ve been in crypto since 2015, always has been — ever since they started trading futures, which was maybe like 2017 -2018 – that has always been a good leading indicator for me to see the price going higher in the future.”
When prices go up, Gunsberg said, the public comes and takes it even higher, which is a “very powerful […] feedback feeds into itself,” but then it also drives the price lower, and “that’s what, to me, embodies so much of this kind of long-term volatility that you see in crypto.”
Melker concluded that unless there is a massive Black Swan event,
“We actually have a good chance of it bottoming out. I also think we’re going to chop sideways and it’s going to be very annoying for quite a while.”
You can watch the entire interview here:
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