Impact of the Fed’s Decision
After the Federal Reserve announced a 50 basis point cut in the Federal Funds rate on Wednesday, altcoins surged significantly, leaving Bitcoin and Ethereum (ETH) trailing in their wake.
Market Performance Overview
According to TradingView data, the Total3 Index—which tracks the market value of the 125 largest cryptocurrencies excluding Bitcoin and Ethereum—gained 5.68% since the rate cut. In comparison, Bitcoin’s market value increased by just 4.4%.
Expert Insights on Altcoin Performance
This trend is not unexpected. Bob Wallden, head of trading at investment firm Abra, explained:
“Altcoins are higher beta than Bitcoin and ETH, so think of them as a leveraged trade on the broader crypto market, similar to how tech stocks outperform the S&P 500 (SPX) during periods of market growth.”
Factors Contributing to Altcoin Gains
Altcoins, which include all cryptocurrencies except Bitcoin and Ethereum, have likely benefited from the recent sell-off, providing momentum for a strong recovery. Bohan Jiang, head of OTC options trading at Abra, noted that the asset class’s low liquidity levels are contributing to increased volatility:
- “Altcoins are on the fringes of the liquidity spectrum, so they tend to outperform when risk assets are doing well and liquidity is plentiful.”
- The conditions appear favorable following the Federal Open Market Committee (FOMC) meeting.
Jiang also highlighted that the weak liquidity and extended short positions in altcoins over the past few months likely triggered outsized gains, akin to a “short squeeze” effect.
Conclusion
In summary, while Bitcoin experienced a modest rise after the Fed’s interest rate cut, it is altcoins that have shown remarkable gains, driven by favorable market conditions and increased liquidity. As the crypto landscape evolves, investors may want to keep a close eye on the performance of altcoins in the coming days.
Ecosystem
Research
News Network
About