Two weeks into the year, and crypto markets are rebounding. The Bitcoin and Ether price are each up some 20% on the seven-day chart. But a recent study of altcoins aims to give crypto investors pause before they go trading the rally.
When the market makes a move like this, crypto traders often shuffle. They make trades to scoop profits, make hedges, or take long positions in the coin they think will gain the most next.
This can result in an increase in volatility in crypto exchange markets. Furthermore, traders anticipate each other’s moves. As a result, the market can become increasingly volatile with self-fulfilling, short-range expectations. While this may seem complicated, crypto trading is worth a world of difference in ROI.
There is a Broad Range of Risks and Reward
For example, while the top three cryptos by market cap gained 20% in the last week, here’s what some altcoins gained: Cardano (ADA) gained 26%. Solana (SOL) gained 70%. Avalanche (AVAX) gained 42%. Lido DAO (LDO) surged by 42%. Aptos (APT) skyrocketed by 94%.
Cardano is up because ADA’s fundamentals surged in volume. the TVL (Total Value Locked) has soared. TVL in Cardano for staking has soared in Jan. Trading on its DeFi protocols swelled as well. There’s also buzz around a new ADA stablecoin and dev toolkit for ADA custom sidechain deployment.
Meanwhile, Citi notes that Solana blockchain activity is high. AWS has partnered with Avalanche to bring its blockchain solutions to enterprises and governments.
Lido DAO keeps pushing forward in an exciting race with MakerDAO. Solana peer Aptos is doing well because of investor excitement over its fast throughput.
It’s easy to see why it’s tempting to go altcoin shopping. But before you whip out your credit card with your eyes full of big numbers with dollar signs on them, don’t forget to stay vigilant against the downsides. While your principal investment could appreciate by 35 or 84% in a week’s time, it could also all disappear as quickly.