The oracle of Omaha Warren Buffet once said, “Be fearful when others are greedy and be greedy when others are fearful.” Opposing positions can be daunting, but often leads to great financial opportunity.
Should you be careful with altcoins?
It can be argued that in the past few weeks, the rise in the price of some altcoins has overshadowed Bitcoin’s own growth. Keep this in mind – altcoins make up about 33% of the total cryptocurrency market. That’s an increase of just 22% in early August. Yet the rise in altcoins’ market dominance has led some like JPMorgan analysts to raise red flags.
In a recent announcement to their clients, JPMorgan analysts warned users of the August trading boom. This increase meant that the trading volume on the spot market exceeded the 1 ton mark. The blog noted
“This buying frenzy on stocks spread to“ altcoins ”in August, when investors piled into non-fungible tokens. The surge in NFTs and DeFi activity has boosted not only Ethereum, but also cryptocurrencies that enable smart contracts such as Solana, Binance Coin and Cardano. “
Needless to say, Solana, Cardano saw a huge boost in their price rallies. The former in particular, with Solana having increased by more than 7,000% since the beginning of the year at the time of going to press. Turning to NFTs, OpenSea, one of the largest NFT marketplaces, has increased trading volume on its platform by over 76,000% since early 2021. In fact, its trading volume only recently exceeded $ 4 billion.
In the same vein, there is an interesting point here that needs to be considered. According to the bank,
“… Net retail inflows into US equities hit a record high of nearly $ 16 billion in July and about $ 13 billion in August. The previous record was last June at 10 billion US dollars. “
Reddit-inspired day traders certainly played a vital role in moving the market as well, the company added.
Given the “madness” mentioned above, JPMorgan executives felt
“Cryptocurrency Markets [are] looks frothy again “
The note went on to close
“The proportion of altcoins looks rather high in historical comparison and in our opinion is more a reflection of the foam and small investor” mania “than a reflection of a structural upward trend.”
Is there still cause for concern? While the extent of the hiking came as a surprise to many, most would argue that there were good reasons for hiking in Cardano and Solana. The former is approaching, for example, the Alonzo HFC event, which is about smart contracts. While the latter was one of the top performing cryptos in August, it also dwarfed most of the alternatives in terms of development and social sentiment.
Do fear and greed play a role in the crypto market?
History may give us the best answer to the above question. Every time the Fear and Greed Index of the crypto market has fallen below 20, the market has flipped. Why? Because feelings of “despondency” are often viewed as points of “maximum financial opportunity”.
Source: Twitter
On the contrary, when the markets are greedy, most traders are at “the point of maximum financial risk”.
Will these warnings deter investors, and especially traders, from making quick profits on altcoins? Not really.
