Why are investors cautious about altcoins?

by Stephen Douglas
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Why are investors cautious about altcoins?
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Why are investors cautious about altcoins?
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Despite the cryptocurrency market capitalization be oscillating above the historic highthe feeling among investors remains “extremely low”. This is what an analyst with more than 800 thousand followers recently highlighted. He presented some reasons that could explain this incompatibility between general sentiment and record numbers for cryptocurrencies, especially altcoins.

Furthermore, he warned that altcoin returns in this cycle tend to be smaller compared to previous ones, highlighting opportunities in some tokens.

In a tweet published on the 21st, Pentoshi highlighted that cryptocurrency market sentiment is “extremely low”, despite the market capitalization having surpassed the all-time high of US$3 trillion. For him, this feeling of fear (corroborated by some followers) has been enhanced by investors’ strategies.

For Pentoshi, the Traders are trading many assets in a short time, a practice known as over-trading. This practice, which does not take long-term trends into account, may be directly influencing this negative feeling.

Be careful with altcoins

According to him, the problem is not just a more active exchange practice, but rather in which assets are being exchanged in the market. According to Pentoshi, traders have been exchanging solid project tokens for low-quality cryptocurrencies. Because these exchanges are motivated by profit, investors end up taking excessive risks.

These high-risk operations should not yield high percentages for investors because, for the trader, the altcoin returns in this cycle will be lower compared to previous cycles.

Last year, the analyst shared an analysis arguing that the cryptocurrency market has reached a level of maturity and adoption that makes repeating the gains seen in past cycles unlikely. In May, Pentoshi predicted that investors would adjust their expectations, due to the dilution of capital in a greater number of projects combined with the constant sales pressure of unlocked tokens.

At the time, CoinMarketCap’s Cryptocurrency Fear and Greed Index (IMGC) indicated positive sentiment in the market. As of May 2024, IMGC is at 76this after reaching its historic high (since July 2023 the index has been measured) in March of the same year, when it reached 92. Currently, IMGC is at 61, with a decreasing trend.

On the other hand, Pentoshi highlighted that the graphs show that the alternative cryptocurrency market – which for him is all cryptocurrencies excluding those in the top 10 – is on the rise.

It is worth highlighting that, in that same May analysis, he said that the market for altcoins could reach $2.2 trillion. Therefore, he stated, there are investment opportunities that can bring considerable returns to investors.

Why are investors cautious about altcoins?

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Why are investors cautious about altcoins?

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Why are investors cautious about altcoins?

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