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

Election 2024 coverage presented by
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
Edited by Benjamin Schiller.
Disclosure
Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.
Helene is a New York-based reporter covering Wall Street, the rise of the spot bitcoin ETFs and crypto exchanges. She is also the co-host of CoinDesk’s Markets Daily show. Helene is a graduate of New York University’s business and economic reporting program and has appeared on CBS News, YahooFinance and Nasdaq TradeTalks. She holds BTC and ETH.