Some digital asset traders say they’ve been rotating funds out of alternate cryptocurrencies (altcoins) into bitcoin (BTC) in anticipation of the leading cryptocurrency significantly outperforming the entire crypto market for at least the next several months.
Kevin Zhou, co-founder of San Francisco-based Galois Capital, told CryptoX his firm is now bullish on bitcoin and expects the upward altcoin trend of the last few months to revert into several months of downward price action.
During months of sustained excitement over new decentralized finance (DeFi) protocols and various altcoins, bitcoin became “under owned,” according to Kyle Davies, a prominent DeFi investor and co-founder of Three Arrows Capital.
Bitcoin is down so far in September, dropping more than 10 percent. But with a subsiding of the DeFi craze and yields “collapsing,” Davies said he expects investor interest to pivot from altcoins toward bitcoin.
Two futures indices recently launched by FTX reflect the recent cooling off in the altcoin market. After consistent double-digit percentage gains since April, the exchange’s Decentralized Finance and Shitcoin indexes have both dropped by double digits this month.
In 2020, altcoins with lower market capitalizations significantly outperformed BTC and ETH thanks in part to global financial markets recovering and stabilizing “a bit,” said Ryan Watkins, bitcoin analyst at Messari.
Also aided by the DeFi and yield farming frenzies, most of the significant altcoin returns started in the second half of the year as tokens like COMP and YFI came onto the market.
As Q4 approaches and returns for altcoins have started to cool off, some professional cryptocurrency traders are betting on significant upside for bitcoin amid continued downside for altcoins.
“The market owns too much stablecoin and non-bitcoin,” Davies told CryptoX, betting that cryptocurrency investors will rebalance toward bitcoin and away from altcoins for now.
September’s moderate altcoin selloff could extend beyond Q4, however, according to Zhou who told CryptoX that, although he’s not a fan of making predictions, this month’s downward trend for altcoins could last for “at least a year.”
