Early start of alt season likely to come as soon as meme coins cool off

Meme coins’ impressive rally appears to have eased despite Bitcoin price showing growing strength.
ETH, XRP, ADA, AVAX, DOT and LINK, are gaining traction as investors look for more speculative assets.
Wealthy crypto investors are starting to take some of their BTC wealth and move it into altcoins.

As Bitcoin (BTC) price continues to forge north, its effective impact on meme coins continues to dwindle. A sector that was previously recording double-digit gains has since cooled off, with Dogecoin (DOGE) and Shiba Inu (SHIB) posting a meager 5% and 0.70% in gains while other large market capitalization-sized altcoins record more gains.

Also Read: ARB, OP, LDO, METIS: ETH beta plays heat up this week as Dencun Upgrade goes live on Gnosis

Meme coins lag as other altcoins show strength

Ethereum (ETH) price is holding well above the $4,000 psychological level, which remains a crucial milestone for the largest altcoin by market capitalization. With it, other altcoins are showing strength, with Ripple (XRP) rising 16% while Cardano (ADA), Avalanche (AVAX), Polkadot (DOT) and Chainlink (LINK) rally 7%, 15%, 9% and 7% respectively.

Other altcoins posting significant gains include Litecoin (LTC) up 20%, Stellar (XLM) with nearly 12% and the Near Protocol (NEAR) price with 15% in gains as AI crypto coins rally ahead of the Nvidia 2024 GTC Conference. A trader and investor on X, @CryptoTony_, alludes to a cool off among meme coins as other altcoins pump.

I expect #Memecoins to cool off soon, then see our other #Altcoins pump .. If your waiting to enter the big Memes such as $FLOKI $PEPE $BONK then wait for that consolidation first
— Crypto Tony (@CryptoTony__) March 11, 2024

Bitwise CIO Matt Hougan recently opined, “…the primary driver of alt season is a classic wealth effect,” adding, “Crypto natives make money in Bitcoin, feel rich, and then look for more speculative assets to invest in.”

Referring to market rotation and wealth effects, Hougan’s description was typical of how people make money in projects with large capitalization and then shift their attention to alternatives of lower market capitalization size. This, in his opinion, is not catalyzed by “percentage return of Bitcoin but the cumulative size of the wealth effect.”

It therefore means that wealthy crypto investors are now moving some of their BTC profits into altcoins. This is a typical altcoin season, where investing in altcoins provides better returns compared to Bitcoin. Consequently, the dominance that Bitcoin holds in the market declines, and that of altcoins increases.

Why this alt season could be different

Although an altcoin season tends to suck out liquidity from the BTC market, the 2024 play could be different, and could prove longer because the ongoing bull market is different. For starters, the impressive rally in Bitcoin price comes well ahead of the halving.

While the previous plays have seen altcoin seasons limit the upside potential of Bitcoin price amid marginal capital shifting out of BTC into the rest of the market, in the 2024 scenario, the Bitcoin price rally is propelled by fresh capital from institutional players after the landmark approval of spot BTC exchange-traded funds (ETFs) on January 10.

13/ This suggests the "wealth effect" can be ongoing for a while, as long as more new money is flowing in (via ETFs) than old money is flowing out (into alts).

Because I think the bitcoin bull market is still in its early stages, I suspect this will be the case.
— Matt Hougan (@Matt_Hougan) March 8, 2024

Amid this frenzy, investor caution is critical to avoid falling victim of projects that camouflage in the bull markets to trade at exaggerated valuations before an epic collapse.

Share: Cryptos feed

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Join Telegram