Are Institutional Investors Buying Altcoins? XRP, ETH Products Get Popular

While the week may have got off to a bad start in the altcoin markets, things seem to have turned for the better. In the past 24 hours, the total market cap of all altcoins has increased from $ 933 billion to $ 1.01 trillion to offset some of the losses earlier this week.

As such, it seems like the correction was just another bump in the road – another minor correction on the way to off-season glory. But has the old season really started?

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What Makes an Altcoin Season Really?

It seems the answer could be yes or no depending on who you ask. Some traders seem to believe that the old season has been going on for weeks (or even months). others believe the old season is still some time away.

CoinTelegraph reported that Ben Lilly, crypto economist and partner at Jarvis Labs, believes true altcoin season is miles away.

Why? According to Lilly, the term “altcoin season” has many different definitions. For him, a real altcoin season is characterized by “market movements that surprise people or at least make traders rethink the normal”.

In other words, an altcoin season really starts when the expected range of support and resistance levels is broken by rapid price action: “The type of action you would like to face, assuming you’re on the right side,” explained Lilly .

In order to determine exactly where this expected range of support and resistance levels lies, Lilly says it is important to look at Bitcoin dominance. According to him, the dominance of BTC is steadily declining and has been trading in an “expected range” since the end of 2019 – with the exception of the massive price recovery of BTC at the end of 2020.

When that happened, Lilly said, “Bitcoin has gotten an absolute rift.” In order for the old season to really begin, the opposite would have to happen: “[if] We’re breaking this expected area down. From our point of view, this means that altcoins are the capital to sit in, as they generate oversized returns compared to Bitcoin. Then it gets wild. “

Crypto markets may not be in an alt season – but they are likely in an altcoin bull market

While crypto markets may not really be in an old season just yet, Lilly says they are having a bull run. This is the case when “investors tend to cross the risk curve of crypto further than just buy Bitcoin, which does not necessarily mean oversized profits compared to Bitcoin”.

Hence, an altcoin bull market could be defined as “when bitcoin dominance is falling while crypto as a whole is in a bull market”.

And that’s exactly what is happening today. The crypto market capitalization excluding Bitcoin has increased by around 8 percent in the past 24 hours. However, if you put Bitcoin back in the mix, the total market cap for crypto only increases 5 percent in 24 hours. At the same time, the dominance of Bitcoin has steadily decreased since the beginning of the year. At the time of going to press, BTC dominance was 51 percent.

Institutional money flows into crypto assets

In addition, there is evidence that money from new sources is flowing into altcoins. For example, CoinTelegraph reported that “institutional investors have gained XRP over the past week,” evidenced by a nearly 100 percent increase in the XRP investment product, AUM.

In particular, Coinshares’ weekly digital asset capital flow report showed that as recently as this week, $ 33 million was invested in XRP investment products, bringing the total XRP-based AUM to $ 83 million.

The report, released April 19, also stated that last week was the most bullish week for institutional crypto investment products in over a month. $ 65 million went into Ether (ETH) products. Tezos (XTZ) received $ 7 million.

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At the same time, Polkadot (DOT) recorded $ 5 million, Bitcoin Cash (BCH) $ 4 million, and Binance Coin (BNB) recorded $ 3 million. Multi-asset products received $ 6 million in new investment. A total of $ 233 million went into institutional funds over the course of the week.

The ether is approaching an institutional heyday

Even with large amounts of cash flowing into altcoin investment products, the vast majority of institutional cash is still tied to the bitcoin markets. According to the CoinShares report, Bitcoin products make up nearly 78 percent of institutional AUM for a total of $ 50 billion. Ether-based investment products account for around 17 percent of the exposure of institutional crypto products. CoinTelegraph stated: “All other crypto assets account for less than 1% of the capital tied up in this sector.”

Over time, however, the demand for altcoin-based investment products appears to be increasing – although much of that demand currently appears to be limited to ethers. However, the development of ether-based investment products is moving fast: Last week, Canadian regulators approved no fewer than three Ethereum ETFs, which were approved in a single day.

Indeed, the narrative is evolving about the role Ethereum plays in the crypto-economy. Finance Magnates previously reported that Ethereum is increasingly attracting the attention of large institutional investors around the world.

In addition, Coinbase published a report in January that stated that its institutional customers were increasingly viewing ether as a store of value: “While our institutional customers mostly bought Bitcoin in 2020, more and more companies were taking positions in Ethereum, the second largest crypto asset by market capitalization.” the report says.

“The reason for owning Ethereum that we hear most from our customers is a combination of i) its evolving potential as a store of value and ii) its status as a digital asset, required to process transactions on its network . “

Could Institutional Investors Look For Alternatives To Bitcoin?

However, institutional interest in ether and other altcoins may come from the same source as why retail investors are interested in these coins: potential.

Artem Tolkachev, the founder of BondAppetit, told Finance Magnates that in the retail markets, “many crypto investors look at the price of Bitcoin and Ethereum and wrongly believe that they have already missed their move with potential profit. So they look for alternatives. “

Artem Tolkachev, the founder of BondAppetit.

“For them, altcoins are like penny stocks,” he said. “But just like penny stocks, most altcoins will go to zero.”

James Putra, Head of Product Strategy at TradeStation Crypto, told Finance Magnates earlier this week about the same retail phenomenon: “Many altcoins simply bounced back when retail investors tried to look for the next bitcoin.”

“Like penny stocks, many private investors are drawn to inexpensive crypto assets. The disadvantages are that altcoins are usually further outside the risk curve, many coins are still in the early stages of their development life cycle, and many are just ideas with an altcoin. “

James Putra, Head of Product Strategy at TradeStation Crypto.

Of course, institutional investors don’t just buy in altcoins – these investment products are there for a reason: They are a safer and more regulated way for institutional investors to access a more diverse group of crypto assets without direct exposure. Still, like many retail investors, institutional investors can be tempted by the lower prices of some altcoins.

Altcoins & the world

The general trend towards greater interest in altcoins and cryptoassets in general could also point to an ever-changing representation of the role of cryptocurrencies in the economy as a whole.

Just as Bitcoin is increasingly viewed as a store of value (or a hedge against inflation), cryptocurrencies could generally be viewed as increasingly important to the future of the financial world.

Shaune Clarke, digital currency advisor, told Finance Magnates, “You could say that altcoins are overbought and everyone should be on the lookout for a major market correction, but look at bitcoin. It has been ‘overbought’ since January and analysts have blown the trumpets announcing a bottom-shaking decline worse than the one it suffered in 2017. We haven’t seen that yet. “

“Crypto prices are reactions to global trends. Turkey will ban cryptocurrency trading by the end of the month – that’s a $ 1 billion market right there, ”he said. “There has been speculation by the US Treasury Department that financial institutions have been charged with money laundering. The Chinese mining region of Xinjiang suffered from a massive power outage. “

“Crypto doesn’t exist in a vacuum. Just because prices are falling doesn’t mean a bubble has burst or is starting to burst. I think altcoins are on an uptrend and while there will be temporary drops there is plenty of room to grow. “

Digital Currency Advisor Shaun Clark.

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