Alt-coins are hot! What does liquidity tell us?
The alt-coin market is hot right now. This could continue alongside anticipation of halving, possibly driven by those feeling priced out of BTC and seeking faster returns. Or we could see alts cool down as speculators rotate back to BTC.
TOTAL3 is the total market cap of alt-coins (cryptocurrency less BTC and ETH), representing the most speculative opportunities in the space. The correlation between alts and central bank liquidity is among the highest that I can find among risk assets.
Liquidity (green) has been increasing since September 2023 and alts (white) have moved steeply since. It’s worth noting when the correlation coefficient deviates from liquidity, which is what we’re seeing now.
This perspective doesn't tell us when sentiment will correct from being overly greedy or overly fearful, only that we're headed toward an extreme. For the time being I am keeping my alt trades relatively small and taking profits aggressively.
TOTAL3 is the total market cap of alt-coins (cryptocurrency less BTC and ETH), representing the most speculative opportunities in the space. The correlation between alts and central bank liquidity is among the highest that I can find among risk assets.
Liquidity (green) has been increasing since September 2023 and alts (white) have moved steeply since. It’s worth noting when the correlation coefficient deviates from liquidity, which is what we’re seeing now.
- Lower correlation when the supply of funds is increasing and alt market cap is flat represents fear in the market (2020 recession)
- Low correlation when market cap is increasing faster than liquidity could indicate an unsustainable euphoria (current)
This perspective doesn't tell us when sentiment will correct from being overly greedy or overly fearful, only that we're headed toward an extreme. For the time being I am keeping my alt trades relatively small and taking profits aggressively.