Altcoins
Falling Cryptocurrency Speculation Index Suggests Bitcoin (BTC) Bull Market Reset
Bull markets are observed to stagnate during periods of excessive optimism, only to pick up again once the speculative froth has dissipated.
Capriole Investments Crypto Speculation Index Shows Speculative Excesses spread during First quarters have dissipated, indicating potential for further bullish bitcoin price action (BTC)the leading cryptocurrency in terms of market value.
The speculation index, which measures the percentage of alternative cryptocurrencies (altcoins) that have a 90-day return higher than bitcoin, has stabilized below 10%, down sharply from a January peak of nearly 60%. Bitcoin, the market’s top cryptocurrency, hit new records above $70,000 in the first quarter and has since fallen back to $58,000.
At the time of writing, there are over 14,800 altcoins in existence, according to data source Coingecko. Most of these coins are illiquid and have difficulty proving their utility. As a result, altcoins are generally considered speculative instruments, with volumes closely related to Google Trends, an indicator of retail investor interest, and the outperformance of altcoins relative to BTC are seen as a sign of speculative mania.
Speculative collapses serve as corrective mechanisms, helping to realign asset prices with fundamentals and tempering excessive speculation. They thus lay the foundations for a healthier long-term environment.
This is what happened in the cryptocurrency market. Since 2019, a speculation index below 10% has coincided with the beginning of strong increases in bitcoin, as observed in the first half of 2019, at the end of 2020 and in the second half of 2023.