While bitcoin (BTC) and ethereum (ETH) remain the top coins, altcoins are still drawing significant interest from institutional investors, argued David Duong, Head of Institutional Research at major crypto exchange Coinbase.
Duong participated in a discussion with popular crypto analyst Scott Melker on March 2, as part of an interview panel that also featured the Founder of crypto options trading platform Hxro Dan Gunsberg and the Founder of investment adviser Morgan Creek Capital Mark Yusko.
Discussing the crypto market performance over the past year, Duong noted that what he is currently seeing in terms of flows on the exchange from Coinbase’s institutional clients is that,
“55% of this is still on bitcoin and ETH, but that would mean that the remainder is still on altcoin – so there’s still a lot of attention being paid to what’s happening in the rest of the ecosystem outside of just Bitcoin and Ethereum.”
What we are currently witnessing in the market is a lot more macro-focused, he added, arguing that people don’t realize that this is “just seasonally a weaker period for a lot of risk assets” because everything is now in an in-between state where, on the one side, “people have their bonus payments, putting money into their 401(k)”, which are personal pension accounts in the USA, and on the other side, it is the time “right before we’re getting a lot of checks being cut for tax season.”
Therefore, Duong said,
“We’re in this kind of like weak period, but we’re trying to draw conclusions about what’s happening with the [Federal Reserve] or what’s happening with other things, the correlation, which by the way is coming down between crypto and other risk assets.”
He concluded that, “if anything”, macro conditions for risk assets including crypto are neutral at the moment. However, he did warn that in the second quarter of this year, “we’re going to hit into the real to debt ceiling issues” when the economy could potentially become weaker.
Melker also commented that we’ve seen “mini-narratives” related to altcoins, but that these seem “much smaller and quicker bubbles than the altcoin narratives we used to see in the past,” he said, adding that,
It seems like “this is that old sort of washing machine cycle of crypto native people just moving in and out of altcoin narratives with no new money coming in.”
It does seem very hyper-cyclical compared to what was seen in the past, Duong agreed, adding that we seem to be “moving very quickly [into it] and then kind of out of it pretty fast.”
As to how new money would enter the space, Yusko argued that, among other things, it’s people realizing that they’ve got the institutional quality real assets that are uncorrelated, saying that “bitcoin is the most uncorrelated asset I’ve ever seen in my career.”
Spring is here and summer is coming
According to Morgan Creek Capital’s Yusko, it is now indeed crypto spring – but “spring isn’t summer.” Spring comes with unstable weather: it’s “windy and choppy,” though he admitted that he didn’t see “Hurricane Sam” coming, referring to the fall of the FTX exchange and its founder Sam Bankman-Fried.
Summer is coming, however, he suggested, especially with the Bitcoin halving approaching, as well as the incoming Ethereum Shanghai fork.
Gunsberg said that, looking at the Bitcoin Futures curve, there are higher prices on the horizon.
“There’s actually a yield being delivered, something that we didn’t see for a while. And that to me, and I’ve been in crypto since 2015, has always been – ever since they started actually having trading futures, which maybe was like 2017-2018 – it’s always been a good lead indicator for me of seeing is price higher out in the future.”
Once the prices go up, Gunsberg said, the crowd comes and takes it even higher, which is a “very powerful […] feedback loop in on itself,” but then it also drives the price lower, and “that is what to me embodies so much of this kind of longer-term volatility that you see in crypto.”
Melker concluded that, unless there is a massive Black Swan event,
“We actually have a good chance that it’s bottoms in. I also think we’re going to chop sideways and it’s going to be really annoying for quite a long time.”
You can watch the full interview here:
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