Whether or not cryptocurrency markets have been in a so-called “alt season” as of late seems to have been a topic of much debate.
After all, at $57K, Bitcoin isn’t too far from its all-time high (ATH), neither in terms of dollars nor days. The last BTC all-time high of $64,863.10 took place just over three weeks ago.
However, when you compare the performance of BTC to other assets in the crypto space, the story gets a little different. While BTC has gently slid down a few thousands of dollars from its peak, other crypto assets have been booming.
For example, the price of Ether (ETH) has been hitting new ATHs almost every day this week. The most recent ATH of $3,541.46 took place roughly 12 hours before press time. (The price had since cooled to $3,451.90.)
Other alternative cryptocurrencies have also been performing well this week. A CoinTelegraph report pointed to a surge in the price of DogeCoin (DOGE) as “the leading indicator for alt season.” DogeCoin also hit a new ATH yesterday of $0.69.
Are cryptocurrency markets in an alt season? And why does it matter?
Scott Melker: “Crypto markets have been in an ‘alt season’ for the entirety of 2021.”
As for the former question, Scott Melker (aka “The Wolf of All Streets”), told Finance Magnates that “crypto markets have been in an ‘alt season’ for the entirety of 2021,” an alt season that “continues to accelerate.”
Melker pointed beyond asset price performance itself: “Bitcoin Dominance, the measure of the percentage of the market cap of the entire crypto market represented by Bitcoin, has dropped from nearly 75 percent to below 50 percent in , indicating altcoins rising in both value and market cap.”
Marie Tatibouet, the chief marketing officer at Gate.io, also pointed to the decline in Bitcoin dominance as an indicator that alt season has arrived. “This shows that the market has matured as investors are starting to see what else is there in the supermarket aisles,” she said. While Bitcoin has struggled to reclaim the $60,000 psychological level, Ethereum has far surpassed the $3,000 level, while coins like Chainlink are testing new highs.”
Scott Melker added that “a simple look at Ethereum’s rise in price versus Bitcoin is a clear indicator of altseason, alongside astronomical gains on other altcoins of a wide variety,” he said. ETH’s price is up 370 percent since January 1st; DOGE is up more than 15,000 percent.
As DeFi grows, Ethereum grows along with it–and vice versa
The rise of Ether may be particularly significant for several reasons. For one thing, positive movement in the price of ETH could indicate positive reception of the software upgrade to “Eth2.0.” The upgrade will increase transaction speeds, lower transaction fees, increase ETH scarcity, and lessen the environmental impact of the Ethereum network, among other things.
Additionally, the growth of Ethereum could also signify growth in the decentralized finance (DeFi) ecosystem that exists on top of the network. Because any Ethereum-based DeFi platform uses small amounts of ETH to execute transactions, the presence of more DeFi users could signify a larger number of ETH holders.
Scott Melker told Finance Magnates that “DeFi assets have been riding the coattails of Ethereum, the platform that most of DeFi is being built on top of. Many, including myself, are projecting a ‘DeFi summer,’ much like we saw in 2020. The most exciting developments in crypto are in the decentralized finance space, which should be reflected moving forward in the related assets.”
Gate.io’s Marie Tatibouet also pointed out that DeFi’s total value locked (TVL) has crossed $75 billion: “More and more developers are entering the space to ‘buidl’ more than ever before,” she said. “The market is maturing more than just ‘fun internet coins to hold’ to become a decentralized internet platform of the future.”
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Why is DeFi growing at such a rapid pace? ETH’s performance is certainly one factor. Garrette Furo, a blockchain consultant and advisor for Cosmos Network, also told Finance Magnates that DeFi assets could be performing so well because many of them are being used in practical ways.
“A common criticism of crypto assets has always been ‘what does it do’ or ‘how does it make money’,” Furo said. “When you think about traditional finance–and valuing assets off of dividends and supply elasticity, et cetera–this criticism makes a lot of sense,” he said. However, “because of DeFi, these questions have direct answers that don’t rely on obscure knowledge.” For example, “Bitcoin can be collateralized for loans in stablecoins.”
The expansion of the DeFi ecosystem could bring Ethereum to new heights
Nate Cox, the chief investment officer of digital assets investment firm Two Prime, told Finance Magnates that the full potential of Ethereum’s DeFi ecosystem is unknown.
He drew a parallel between Apple’s iPhone and the dawn of the App Store: “When Apple released the iPhone, it was impossible to calculate the number of industries it would disrupt,” he said. “While the phone itself pushed Apple to become the most valuable company in the world, the applications delivered via the app store have arguably created multiple times the value of the hardware delivering it.”
“Similarly, Ethereum provides a decentralized platform (similar to Apple’s App Store) that is already disrupting some of the most profitable industries in the world,” Cox explained. “Finance, intellectual property, and insurance could all be reimagined on the blockchain, and we’re just getting warmed up.”
What’s next for Bitcoin?
Could ETH’s market cap outgrow Bitcoin’s?
Nate Cox believes it might happen: “the upside value of Ethereum could easily surpass the $1 trillion level, and at its current growth rate, may overtake Bitcoin as the world’s most valuable digital asset,” he told Finance Magnates.
However, Scott Melker isn’t convinced: “As Ethereum continues to rise, people are already revisiting the old narrative of the ‘flippening’ – the idea that Ethereum market cap could surpass Bitcoin’s,” he said. “It is far too early to discuss that, an initial sign of euphoria in the altcoin market. Anything is possible, but there’s no reason to expect it for now.”
Still, the continuation of sideways or downward movements on BTC charts could further contribute to the rise of ETH and other altcoins.
“Anytime Bitcoin cools off and consolidates, we tend to see meaningful movement in the altcoin market,” Scott Melker said.
So, “Investors have been asking ‘what’s next?’ for the largest digital asset in the world,” Nate Cox said. While it may be easy to write off bitcoin as a slow-growth asset right now, it’s important to keep some perspective. In one year, bitcoin has gained more than $800 billion in market cap with a value now worth more than $1 trillion.” Ethereum, by comparison, is currently worth $395 million.
Scott Melker also said that it’s important to keep things in perspective: “After such a massive run, any asset is expected to spend time trading sideways, which is what we are seeing on Bitcoin.”
“There is no reason to be fundamentally or technically bearish on Bitcoin – we are still in the early innings of this cycle. My belief is that the likely approval of a Bitcoin ETF will be the next catalyst for a major move.”
“We are still very early,” Melker told Finance Magnates. “The notion that people are too late or have missed their opportunity to gain exposure to Bitcoin and crypto is absurd. These will be the most important assets of our generation.”