Latest ‘Altcoin Season’ Fueled by XRP, Tron, Stellar Pushes Crypto Market Value to $2T for First Time
Price rallies for cryptocurrencies besides bitcoin (BTC) has helped push the digital-asset industry’s total market capitalization to about $2 trillion, doubling in just a few months.
These “alternative cryptocurrencies,” also known as altcoins, include ether (ETH) along with bittorrent (BTT), xrp (XRP), tron (TRX) and stellar (XLM). They have all logged double-digit percentage growth in the past 24 hours, according to data from Messari.
Prices for bitcoin have doubled this year, for a market value of $1.1 trillion, but the rally has paused in recent weeks, allowing altcoins to seize the market leadership. Bitcoin’s market dominance, or its share of the overall industry capitalization, has slid to about 57%, from around 73% at the start of the year, according to TradingView.
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Ether, the native cryptocurrency of the Ethereum blockchain and the second-biggest overall, recorded an all-time high near $2,100 last week. The digital asset has benefited from speculation that the Ethereum blockchain could see growing use as the network of choice for decentralized finance, or DeFi, consisting of automated, blockchain-based software protocols that might someday replace banks and Wall Street trading firms.
Galen Moore, CoinDesk Research’s director of data and indexes, wrote in an analysis that the outstanding performance during the latest “altcoin season” has come from digital tokens belonging to so-called smart-contract platforms that could compete with Ethereum or complement it.
These alternative blockchains also have benefited from increased usage of stablecoins, which are digital tokens whose value is pegged to real-world currencies, primarily the U.S. dollar.
“I feel like the real value and application of stablecoin, decentralized finance on Tron, and BitTorrent has been identified,” Justin Sun, the founder of the Tron blockchain and CEO of BitTorrent, told CoinDesk via a WeChat message.
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Daily transaction counts on Tron have been consistently surpassing the transactions on Ethereum, according to data from CoinDesk and Coin Metrics. The number of tether stablecoin transactions on the Tron blockchain has also beaten Ethereum’s count, as CoinDesk reported.
Yet, for Ethereum the success has come at a cost: The network’s popularity has resulted in congestion, driving up transactional rates known as “gas fees.”
“The competition between public blockchains is a good thing,” Tron’s Sun said. “It is true that it is nearly impossible to launch new projects on Ethereum because no one want to use projects that come with hundreds of dollars of mining cost at a slow transaction speed.”
One example of the fast industry growth, according to Denis Vinokourov, head of research at Synergia Capital, is Binance Smart Chain (BSC), a smart-contracts blockchain sponsored by the giant cryptocurrency exchange Binance.
“The narrative is that if you provide innovative products, competitive yields, then one can compete with the old-school establishment” of Ethereum, Vinokourov told CoinDesk. “The key is cheap, fast transactions.”
The total transaction volume on Binance Smart Chain in February alone hit more than $700 billion, according to a DappRadar report dated March 11. The unique active wallets on the blockchain increased to 108,000 in February from 30,000 the prior month. Ethereum in February had 67,000 unique active wallets.
“The growth of BSC is generally good for altcoins,” Vinokourov said. It “means you can compete against ether.”
A Binance spokesperson declined CoinDesk’s request to comment on the recent altcoin rally, including Binance’s BNB token.
Early crypto adopters vs. crypto newbies
Unlike bitcoin’s impressive growth since early 2020, much of it driven by institutional investors, the altcoin rally may have been fueled by early crypto adopters and retail investors who are newly arriving to the space.
“As institutional players enter the bitcoin market more and more, they have improved stability, which then begets more stability,” Chad Steinglass, head of trading at CrossTower, said. “While this new dynamic is a welcome development for many investors, it takes away some of the shininess and ‘wild wild west’ mentality that many early adopter crypto traders crave.”
Similar to retail investors’ interest in so-called “meme stocks” such as GameStop in the traditional stock market, many crypto traders like altcoins with higher volatility and risk than bitcoin – for the “excitement” and increased chances of “seeing multi-bag returns,” Steinglass said.
Arthur Cheong, founder and portfolio manager at DeFi-focused crypto fund DeFiance Capital, added that the renewed interest in altcoins also came from “unsophisticated retail” traders.
Traders who “don’t perform much research are coming back to the market,” Cheong said, citing increased trading volume of altcoins in South Korea, a country that’s primarily dominated by retail crypto investors.
What does the new alt season mean for bitcoin?
Though bitcoin’s market dominance has waned, analysts said the growing interest in altcoins will eventually benefit the largest cryptocurrency.
“These early adopters shifting to altcoins will both work to decrease volatility in bitcoin and also eventually help decide the winners from the losers in the alt space, which is kind of a necessary condition for any altcoin to emerge as a viable longer-term asset,” Steinglass said.
Ki Young Ju, CEO of blockchain data provider CryptoQuant, said the heightened capital flows could also migrate back to bitcoin as time goes by.
Bitcoin “will absorb the altcoin market cap sooner or later,” Ju said.
Recent announcements of moves into cryptocurrencies by established financial players like Visa, PayPal, Goldman Sachs and Morgan Stanley have strengthened traders’ confidence the industry is seeing greater mainstream adoption.
Bitcoin’s rally over the past year has been fueled by speculation the oldest and largest cryptocurrency might be useful for investors as a hedge against inflation in the wake of trillions of dollars of coronavirus-related stimulus injected into financial markets by governments and central banks.
In addition to the growing speculation over DeFi, there’s been a flurry of interest recently in non-fungible tokens, or NFTs, which represent stakes in unique assets such as art, collectibles, even sneakers.
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Bitcoin Steady Near $59K; Gains in Altcoins Push Crypto Market Cap to $2T
Bitcoin trading on Coinbase Source: TradingView
Bitcoin (BTC) trading around $59,002.29 as of 20:00 UTC (4 p.m. ET). Climbing 1.75% over the previous 24 hours.
Bitcoin’s 24-hour range: $56,846.97-$59,243.04 (CoinDesk 20)
BTC trades above its 10-hour and 50-hour averages on the hourly chart, a bullish signal for market technicians.
Bitcoin opened the week with another failed attempt to break through a key psychological level at $60,000, and has been trading steadily near $59,000.
Bitcoin’s spot trading volume on eight major crypto exchanges tracked by CoinDesk was around $2 billion on Monday, mostly unchanged from the prior day.
Source: CryptoCompare
Meanwhile, bitcoin’s 30-day volatility has also dropped, to near 56%, a level not seen since the beginning of the year.
Source: CoinDesk Research
The oldest cryptocurrency is now trading in “a consolidation phase,” as CoinDesk’s Damanick Dantes wrote earlier Monday, with initial support around $56,000.
Ether and altcoins
Ether trading on Kraken Source: TradingView
Ether (ETH) trading around $2,105.07 as of 20:00 UTC (4 p.m. ET). Climbing 2.05% over the previous 24 hours.
Ether’s 24-hour range: $2,005.46-$2,124.70 (CoinDesk 20)
Ether trades above its 10-hour and 50-hour averages on the hourly chart, a bullish signal for market technicians.
The market chatter Monday was on neither bitcoin nor ether, but on multiple alternative cryptocurrencies (altcoins), where price rallies helped pushed the total market capitalization of all cryptocurrencies to $2 trillion.
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Tokens including bittorrent (BTT), tron (TRX) and tezos (XTZ) have all logged double-digit percentage gains in the past 24 hours as investors and traders seek lucrative returns from small-cap tokens, along with the higher risks.
“Bitcoin’s price has stabilized between $55,000 and $60,000, creating a bullish market environment that encourages investors to explore other cryptocurrencies in the market,” Steve Ehrlich, CEO and co-founder of Voyager Digital, said. “This has coincided with the fall of bitcoin dominance, a leading trend indicator of what market cycle we are actively in.”
According to TradingView, bitcoin’s market dominance is down to around 57% from near 73% at the beginning of the year.
Digital assets on the CoinDesk 20 are mostly in green Monday. Notable winners as of 20:00 UTC (4:00 p.m. ET):
Notable loser:
Other markets
Equities:
Asia’s Nikkei 225 closed up by 0.79%.
The FTSE 100 in Europe was closed on Easter Monday.
The S&P 500 in the United States closed in the green 1.44%.
Commodities:
Oil was down 4.34%. Price per barrel of West Texas Intermediate crude: $58.78.
Gold was in the red 0.39% and at $1727.70 as of press time.
Treasurys:
The 10-year U.S. Treasury bond yield fell Monday dipping to 1.709%.