Amidst surging prices, the market for so-called alt-coins looks “frothy”, according to investment bank analysts at JP Morgan, who have fired a warning that’s in contrast with recent commentary from crypto evangelists.
JP analysts, in a note, highlighted that trading in altcoins – the junior bracket of cryptos which are smaller and typically more volatile than Bitcoin and Ethereum – now represents around 33% of all the crypto market, up from 22% a month ago.
In this time, cryptos like Cardano and Solana have soared to new highs, whilst the Doge ‘meme-coin’ has similarly ratcheted higher.
The prices of crypto mainstays Bitcoin and Ethereum have each rallied after May’s sharp downturn that coincided with a Chinese clampdown on crypto mining, and separately, the market for NFT (non-fungible token) digital assets has boomed.
JP Morgan analysts said in a note that the jump in altcoin interest is “likely to be a reflection of froth and retail investor 'mania' rather than a reflection of a structural uptrend” and cautioned that it may not be sustainable over an extended period.
The banker view is in contrast with crypto-evangelists, a number of which have in recent weeks predicted the coming of a new super cycle, driven in part by advances in technology and structural changes in the crypto ecosystem.
Ethereum for example is seeing as major upgrade to its blockchain technology, whilst Cardano has seen its market capitalisation boom in recent weeks as it advances the roll-out of new systems to enable smart-contracts as part of its ongoing expansion.
The popularity in certain altcoins, like Cardano and Solana, meanwhile comes amidst the greater awareness and scrutiny on the environmental footprint of Bitcoin and older cryptocurrency systems.
Among the typically newer cryptos commonly referred to as ‘altcoins’ are blockchain systems that are designed to be more scalable and less impactful than Bitcoin. Cardano and Solana for example both use a proof-of-stake methodology, rather than Bitcoin’s proof-of-work which requires high-powered computation to create new units.
Cardano is up 125% in the past month, and trading at US$2.95 it has a market capitalisation of US$95.4bn, whilst Solana is up 338% in the same period and at today’s price of US$145.45 has a total worth of US$42.2bn.
For context, Bitcoin has a total market value of US$928bn at the current price of around US$49,000, and at US$3,8000 per Eth token the Ethereum crypto is worth US$446bn in aggregate.