Altcoins

Buying “Ethereum Beta” Altcoins Is a Recipe for Disaster: Research

Published

6 months ago

19 July, 2024

In a research paper published on July 18, 2024, cryptocurrency researcher Thor Hartvigsen strongly warned against the investment strategy of buying high-beta altcoins within the Ethereum ecosystem as a leveraged tactic, especially with the upcoming launch Ethereum spot ETFs in the United States.

Hartvigsen analysis The article “ETH Beta – A Recipe for Disaster?” offers an analysis of whether buying ETH-correlated altcoins, commonly referred to as “ETH betas,” is a good investment strategy. These assets, including tokens like OP, ARB, MANTA, MNT, METIS, GNO, CANTO, IMX, STRK (all L2), MKR, AAVE, SNX, FXS, LDO, PENDLE, ENS, LINK (all DeFi), PEPE, DOGE (all memes), SOL, AVAX, BNB, and TON (L1 alts), are traditionally considered to offer leveraged exposure to Ethereum’s price movements, assuming higher volatility relative to Ethereum itself.

The report analyzes several critical areas: the comparison of price performance between these altcoins and Ethereum, their correlation coefficients and betas relative to Ethereum, and their risk-adjusted returns as measured by the Sharpe ratio. The researcher highlights the risks and inefficiencies inherent in using these altcoins for increased exposure to Ethereum.

Why Buying “Ethereum Beta” Altcoins Is Generally a Bad Idea

Speaking of price performance, Hartvigsen points out: “The TOTAL3 (altcoin market cap) to ETH market cap is around 1.48. Since 2020, this chart has only been this low on a few occasions, signaling ETH’s outperformance relative to most altcoins.” This historical context sets a grim precedent for those hoping for altcoins to outperform alongside Ethereum’s growth. The researcher points out that despite periodic recoveries to these levels, the overall trend has been downward, a worrying signal for altcoin investors.

“It is worth noting that no L2 token has outperformed ETH YTD, with the top performing token, GNO, up 34%, while ETH has seen a gain of 44%. The worst performers are MANTA, STRK, and CANTO, all down over 60% this year,” Hartvigsen said. As for the top L1 alts, AVAX is the only one down YTD versus ETH. “Of the 8 DeFi tokens in this basket, 3 have outperformed ETH, namely PENDLE (+254%), ENS (+163%), and MKR (+78%). The other 5 are all down YTD, with FXS being the worst performer, down 73%,” the researcher added.

In the meantime, Memecoins Cryptocurrencies have been the best bet of the year so far. “This is also reflected in the performance of Ethereum’s largest native digital currencies. PEPE is the biggest gainer in the sample, up +708%, while SHIB is up 74% and DOGE is up 31%,” according to Hartvigsen.

The correlation section of the report delves deeper into the relationship these altcoins have with Ethereum. “The sample of altcoins was not chosen randomly, but consists of tokens that are generally assumed to be correlated with ETH’s performance,” Hartvigsen explains.

He further notes that “the correlation between ETH and ETH is obviously perfect and is therefore 100%. The alts that are most correlated with ETH are GNO, SNX, METIS, AAVE, and ARB.” However, while some tokens display a decent correlation with Ethereum, the researcher cautions that these do not necessarily guarantee similar performance results, especially in this crypto cycle.

Correlation with ETH | Source: X @ThorHartvigsen

When it comes to beta, which measures an asset’s volatility relative to the market, the results are telling. “From this analysis, it is clear that only a few altcoins have a high beta coefficient relative to ETH, namely PEPE, METIS, ENS, and PENDLE,” Hartvigsen says. This suggests that while some altcoins have higher volatility and therefore higher return potential relative to Ethereum, they also carry proportionally higher risk.

Altcoin Beta vs. ETH | Source: X @ThorHartvigsen

The calculation of the Sharpe ratio, which provides a measure of risk-adjusted returns, adds another dimension to the analysis. Hartvigsen notes: “The Sharpe ratio calculations highlight the volatility-adjusted returns of these altcoins, which have varied significantly. This is critical because investors often overlook the increased risk that these “ETH beta” assets carry.”

In concluding his findings, Hartvigsen delivers a clear verdict: “Buy these altcoins “Getting into leveraged Ethereum exposure is, in my opinion, a stupid play, because you are taking on a lot of additional risk that you may not be aware of. If you are looking for leveraged ETH exposure, it makes more sense to simply go long ETH 2x on Aave, for example.” He points out that such a strategy guarantees 100% correlation and a beta of 2, without any unnecessary complications.

At press time, ETH was trading at $3,439.

Ethereum Price ETH breaks above 0.618 Fibonacci level, 1-week chart | Source: ETHUSD on TradingView.com

Featured image created with DALL·E, chart by TradingView.com

Fuente

Altcoins

Long-Term Impact of Ethereum ETF on Cryptocurrency Market

Published

6 months ago

29 July, 2024

CoinFlix Staff

Long-Term Impact of Ethereum ETF on Cryptocurrency Market

Popular crypto analyst Michael van de Poppe has highlighted his altcoin portfolio approach in light of the new Ethereum ETF. In a recent Youtube videoThe analyst explained the measures he would take for this major market event.

The Ethereum ETF was listed on the stock exchange and it took time to get approval and so far there has been no significant change in price. The analyst pointed out that the long-term effect could be quite significant, comparing it to the situation of the Bitcoin ETF where the initial decline was followed by large inflows.

According to Van de Poppe, the Ethereum ETF’s trading volume on the first day of trading was about 25% of the volume Bitcoin ETF He noted that the first day of trading was marked by low inflation, and said there was a net inflow of $150 million to $160 million, which reduced the available supply.

Altcoins are poised for growth

The analyst said that as Ethereum adoption increases in the future, the supply of Ethereum will decrease, which is a deflationary model. Ethereum is up about 15% since the ETF approval, the broader market reaction has yet to happen as several sell-offs have taken place, including the Grayscale Trust.

Van de Poppe also mentioned other important market events, including the end of Mount Gox The process of repaying creditors initially caused tensions in the markets, but had little effect subsequently. It also highlighted the role of macroeconomic factors, which can lead to Fed rate cuts, which can affect markets.

In this regard, looking at van de Poppe’s strategy, he is still keen to trade within the altcoins of the Ethereum ecosystem. He stated that there is a possibility of short-term price fluctuations that may discourage many people, but the long-term still looks good due to the improvement and adaptation that has been made to Ethereum and its environment.

According to the analyst, substantial inflows could propel Ethereum towards new historic highs with estimates ranging from $5,000 to $7,000. Despite the current market fluctuations, he is confident that macroeconomic changes and greater liquidity will be favorable for altcoins.

He explained that his broad approach to altcoins, especially those associated with Ethereum, will be beneficial because the market will react differently to these events. The basis for his optimism comes from the fact that he believes that Ethereum and all associated projects are still extremely undervalued and have the potential to skyrocket as sentiment changes.

Looking ahead and market adjustments regarding the Ethereum ETF and other macroeconomic factors, the analyst remains bullish on altcoins. He suggested investors stay informed and believe that in the ever-changing world of crypto, they will eventually be rewarded.

Fuente

Altcoins

Altcoins Are Severely Undervalued, Awaiting Ethereum Move | Flash News Detail

Published

6 months ago

28 July, 2024

CoinFlix Staff

IntoTheBlock Releases Report on Institutional DeFi Trilemma

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Altcoins

Altcoins Correct Amid ETH Decline, Grayscale Outflows | Flash News Detail

Published

6 months ago

28 July, 2024

CoinFlix Staff

Disclaimer

Fuente

Altcoins

Epic Altcoin Rally Expected for August and September

Published

6 months ago

28 July, 2024

CoinFlix Staff

Crypto analyst predicts massive altcoin rally similar to Q1 2024, urging patience and accumulation.
Bitcoin’s potential as a reserve asset and its technical patterns suggest that it will drive the rise of the cryptocurrency market.

Captain Faibik, a renowned crypto analyst, has created excitement in the cryptocurrency sector with his latest prediction. He indicated that we are on the cusp of a massive altcoin rally, similar to the one we saw in Q1 2024.

We are on the verge of a massive Altcoin rally, similar to Q1 2024📈

Keep accumulating and hold with patience. (Patience will be rewarded)

The majority of #Altcoins have already hit rock bottom and are about to escape.

In my opinion, August-September is going to be epic for Altcoins.🚀🚀#Crypto pic.twitter.com/cMdHagiaYc

— Captain Faibik (@CryptoFaibik) July 24, 2024

Accumulating and Holding Altcoins: The Path to Potential Profits

He stressed the need to accumulate altcoins and hold them patiently, as it will eventually pay off. According to him, the majority of altcoins have already bottomed out and are about to break it. He believes August and September will be epic months for altcoins.

In a chart posted by Captain Faibik, the overall crypto market cap, excluding Bitcoin and Ether, known as TOTAL3, is approaching the upper boundary of a descending channel pattern.

This context suggests a potential breakout and a significant rally towards the $1 trillion mark. Technically, the decline since mid-March is interpreted as a corrective trend for the value of TOTAL3, signaling a preparation to enter a rally structure.

Bitcoin’s influence and legislative developments suggest good prospects for the future

Furthermore, based on sentiment and technical patterns, Bitcoin, the world’s leading cryptocurrency, appears poised to lead the charge in the cryptocurrency market. Bitcoin’s performance often sets the tone for the market as a whole, and a strong move in BTC could trigger a significant rally in altcoins.

Previously, as we have already said reportedSenator Cynthia Lummis said she plans to introduce a bill at the upcoming Bitcoin conference that would require the Federal Reserve to hold Bitcoin as a reserve asset.

If this law passes, the US will treat BTC as a long-term investment rather than selling huge amounts infrequently, which could disrupt the market.

In addition, asset management firm VanEck has proposed a bold scenario in which Bitcoin Price Could Reach $2.9 Million Per BTC By 2050based on its fundamental outlook. Matthew Sigel, head of digital assets at VanEck, and senior investment analyst Patrick Bush noted that their estimate is based on Bitcoin’s adoption as a global medium of exchange and reserve asset.

As Bitcoin price increases, altcoins are expected to gain popularity, indicating the start of a bullish rally shortly after the BTC halving event.

Meanwhile, at the time of writing, the price of BTC was hovering around $67,007.99up 4.67% over the past 24 hours following a short-term correction.