The digital assets expert at JPMorgan said that the recent surge in the value of altcoins appears to be unsustainable and could lead to a similar crypto crash that was seen in May. Cardano’s ADA, Solana, Binance Coin and other tokens have seen an increase in price in the last couple of weeks, as there has been rising excitement about their potential use in non-fungible tokens (NFTs) and the decentralized finance (DeFi) space. Most of the larger altcoins have remained high for the month, even after Tuesday’s steep selloff in the crypto market and another wobble that happened on Friday.
However, according to JPMorgan’s global market strategist, Nikolaos Panigirtzoglou, this rally doesn’t appear to be sustainable because it is mostly driven by unrealistic expectations associated with the tokens. He is also the crypto expert of the bank and said that there was a big question mark in this situation. He questioned whether the hype surrounding the alternatives to ethereum, such as binance, cardano, and Solana justified and whether they would have enough traffic on their networks as well as wallet addresses for justifying the kind of valuations they have. He said that it seemed as if the crypto space was in a ‘melt-up’ phase.
This means that investors are rushing into assets that are going up because they want to get some of the gains. However, he also noted that such phases usually happen before a sharp decline. The strategist said that it was likely that something similar to what happened in May would occur. That was when the crypto market crashed, including bitcoin and the ether, after a rally where altcoins like XRP and dogecoin had experienced a price surge. Similarly, there has been a sharp rally in altcoins in recent weeks, as Solana had gone up by 318% in the month till Friday.
In the same time period, Cardano has seen its price surge by 29%, while it has been 23% for XRP. Retail investors have turned towards certain tokens of networks they believe will be able to compete against Ethereum in order to become widely used in the quickly expanding world of NFTs and DeFi. The latter is the use of crypto technology for removing the need for intermediaries in financial contracts. As far as the former are concerned, they are a booming class of crypto-collectibles as well as the artwork. CEO and co-founder of CoinGecko, Bobby Ong said that the excitement was undoubtedly overblown.
He considers it a typical crypto cycle; investors first take an interest in bitcoin, then move towards some volatile alternatives for additional gains. Then, a crash drives people out of the market and they eventually begin buying bitcoin again. Panigirtzoglou said that he could even see some similarities with the crash that had occurred back in 2018. That one had also been preceded by a major rise in altcoins and resulted in bitcoin wiping out more than 80% of its value. But, he did say that the crypto market wasn’t going to crash that hard because big companies like Tesla and financial institutions had also bought into it.