Altcoins Surge Leaving Bitcoin and Ether Behind After Fed Cuts Interest Rate

Bitcoin

(BTC)

may
have
outperformed
stocks
in
the
aftermath
of
the
Federal
Reserve’s
decision
to
lower
interest
rates
on
Wednesday,
but
the
true
winners
in
the
crypto
universe
are
altcoins.

Total3,
an
index
that
tracks
the
market
capitalization
of
the
top
125
cryptocurrencies,
excluding
bitcoin
and
ether

(ETH),
was
trading
5.68%
higher
since
the
central
bank’s
announcement
that
it
would
slash
the
Federal
Funds
rate
by
50
basis
points,
according
to
data
on
TradingView.
Bitcoin’s
market
cap,
by
contrast,
rose
only
4.4%.

This
isn’t
unusual,
said
Bob
Wallden,
head
of
trading
at
investment
firm
Abra.

“Altcoins
are
higher
beta
than
bitcoin
and
ether,
so
think
of
them
as
a
leveraged
play
on
the
broader
crypto
market
similar
to
tech
stocks
outperforming
the
S&P
500
(SPX)
in
time
of
green
shoots,”
he
said.

The
asset
class,
which
includes
all
crypto
assets
besides
bitcoin
and
ether,
might
have
also
benefited
from
a
recent
period
of
overselling,
which
Wallden
said
is
adding
velocity
to
their
bounce
back.

The
relatively
low
liquidity
levels
of
altcoins
means
they
tend
to
move
with
greater
volatility,
said
Bohan
Jiang,
Head
of
OTC
options
trading
at
Abra.

“Altcoins
are
at
the
fringes
of
the
liquidity
spectrum,
and
so
will
always
be
convex
in
performance
when
risk
assets
perform
well
and
liquidity
is
abundant,
which
seems
to
be
the
case
post-FOMC,”
he
said.

“They
also
perform
as
a
function
of
liquidity
and
positioning:
liquidity
in
alts
is
substantially
poorer,
causing
outsized
moves
both
ways.
Extended
short
positioning
building
up
over
the
past
few
months
can
therefore
cause
short-squeeze-like
outperformance
higher.”

The
Federal
Reserve’s
decision
to
lower
interest
rates

pushed
bitcoin
above
$64,000
on
Thursday,
a
price
last
seen
on
Aug.
26.
It
later
bounced
back
and
is
currently
trading
at
$62,898.

Kris
Sandor
contributed
to
the
story