Bitcoin (BTC) tried and failed at holding above $35,000 this week, with one analyst arguing traders likely took their BTC profits and rotated into altcoins, pushing those prices higher.
BTC price spent most of the week stuck between $34,000 and $35,000, with every attempt to break to the upside so far – even hitting a fresh yearly high almost touching $36,000 early Thursday – meeting with heavy selling pressure, pushing down the price.
Bitcoin was changing hands at around $34,400 after weak U.S. jobs report, slightly up just under 2% for the week, with ether (ETH) up a similar amount.
Meanwhile, large-cap tokens of layer 1 networks (L1) such as Avalanche (AVAX), Cardano (ADA) and Polkadot (DOT) jumped 10%-15% over the same time frame and Solana (SOL) hit a 14-month high Wednesday and Friday afternoon remained higher by 25% over the previous seven days.
Decentralized finance (DeFi) tokens posted the biggest weekly advance among the CoinDesk Market Index sectors. The CoinDesk DeFi Index (DCF)jumped almost 10% in a week, driven by double-digit rallies by tokens of decentralized exchange UniSwap (UNI), SushiSwap (SUSHI), as well as lending platform Aave’s native token (AAVE).
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Bankrupt crypto lender Voyager Digital’s native token (VGX) also popped 20% Friday as some 30% of the token’s supply was sent to a burn address, potentially to destroy.
The CoinDesk Market Index (CMI), a basket of more than hundred cryptocurrencies weighted by market cap, outperformed the two blue chip cryptocurrencies with its 3.2% gain, underscoring the leadership of alternative cryptocurrencies (altcoins).
Lucas Outumuro, research head of IntoTheBlock, said the outperformance of smaller, riskier tokens is a sign of capital rotation from bitcoin and ether after their sizable rallies, a typical behavior from investors during crypto bull markets.
“Historically crypto cycles have followed the trend where BTC leads the first surge, then ETH, with capital progressively being allocated to lower cap and riskier bets,” Outumuro said. “This week’s trend suggests this rotation is beginning to take place as BTC and ETH trend sideways while DeFi and alternative layer 1 tokens record a strong rebound.”
“Despite the rotation into riskier assets, the demand flowing into crypto appears to be relatively organic, led by spot buying,” Outumuro noted. “Even though the price momentum may be getting overheated short-term, there are signs of sustainable demand driving the crypto uptrend.”