The crypto sphere stands at the precipice of a watershed moment as the altcoin market cap edges closer to breaching a pivotal resistance level. Crypto analyst Rekt Capital says the altcoin market cap is approaching a key $315 billion resistance level. If it can close above that line weekly for the first time, it would mark a major milestone.
However, this $315 billion resistance zone has played a pivotal role. Rekt Capital points out that last week, the combined market caps of alternative coins rallied up to test that $315 billion level but failed to break through. The altcoin market cap was quickly rejected back down to the $250 billion range. But now, just days later, it has climbed back up and is testing that heavy resistance once again.
The “Wealth Effect” Driving Altcoin Investments
While the market teeters at this key level, analysts are weighing in on what could be driving this latest alts surge. Bitwise Chief Investment Officer Matt Hougan believes that the primary catalyst is a “wealth effect.” An X (Twitter) thread from Hougan explains how crypto traders and investors often take some of those gains and stick them into more speculative altcoin projects after making huge profits from Bitcoin’s rise.
It’s a trend in traditional markets, too – as people profit from stocks like Amazon and Apple, they get wealthier and plow money into riskier small-cap stocks, venture capital funds, or trips to Vegas. The more total wealth created by an initial asset’s rise, the more money gets diverted into riskier areas.
Hougan notes that since the November 2022 lows, Bitcoin’s market cap has grown a staggering $1 trillion. That enormous wealth increase sets the stage for crypto traders to put substantial cash into altcoins. Compared to past cycles when Bitcoin generated less absolute dollar wealth at this stage, far more money can now rotate into altcoin projects.
According to Hougan, improving infrastructure for altcoins is another factor fueling interest. Technology upgrades like Ethereum’s Dencun and the rise of Layer 2 scaling solutions make non-Bitcoin crypto projects more compelling.
However, in Hougan’s opinion, this does not imply the end of the bull market is imminent. Normally, altcoin bull runs have capped BTC gains as money moved out of it. Nevertheless, with new money from institutional investors going into Bitcoin through ETFs, these two trends could possibly continue to happen over an extended period as “everything season,” whereby both Bitcoin and altcoins rise together. Accordingly, Hougan advises against being overly confident with overblown markets, which results in poor projects being grossly overrated.