The crypto market has experienced significant volatility in early 2024, shaped by a series of events and emerging trends. This analysis by Hyperloop Capital Insights projects potential trends for the remainder of 2024, offering valuable insights for discerning investors.
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Disclaimer: This analysis presents projections based on current data and does not constitute financial advice. It is intended for informational purposes only.
Bitcoin’s Correlation with Gold: A Strengthening Narrative
The concept of Bitcoin as “digital gold” has gained significant traction in traditional markets. From publicly traded companies holding Bitcoin on their balance sheets to investment funds recommending Bitcoin allocation, and even nations accumulating or utilizing Bitcoin for payments, its value proposition is steadily strengthening.
Top 10 Public Companies with the Largest Bitcoin Holdings. Source: Coingecko
The launch and substantial inflows into Bitcoin ETFs in the US underscore growing investor interest. Significant assets under management by institutions like Grayscale, Bitwise, and BlackRock further bolster confidence in Bitcoin.
Bitcoin ETF Fund Flows. Source: coinglass.com
Historically, Bitcoin and gold prices have exhibited a notable correlation. Recent months, however, have seen a divergence, with gold reaching new highs while Bitcoin has consolidated. Nevertheless, given Bitcoin’s increasing acceptance and macroeconomic uncertainties, a renewed correlation mimicking gold’s price action remains plausible.
Bitcoin and Gold Price CorrelationComparison of Bitcoin and Gold Price Action
Ethereum’s Growth as a Catalyst for Altcoins
Several factors point to a potential resurgence for Ethereum, including the anticipated launch of Ethereum ETFs, the ongoing development of Layer-2 scaling solutions, and emerging trends like restaking. Ethereum’s sustained development could signal a market reversal, as key ecosystem metrics like gas fees and the Crypto Fear & Greed Index have reached historically low levels, reflecting widespread market sentiment.
Ethereum’s price action has historically shown a strong correlation with the altcoin market capitalization. Therefore, Ethereum’s growth could potentially stimulate broader altcoin market growth.
Comparison of Ethereum Price Action and Crypto3 Market Capitalization
*Crypto3: Market capitalization of the cryptocurrency market excluding Bitcoin, Ethereum, and Stablecoins.
However, even with a potential Ethereum resurgence, not all altcoins are expected to perform equally. Tokens directly related to the Ethereum ecosystem, such as ETHW, Layer-2 tokens, and those involved in restaking, are likely to attract capital. Tokens with strong “pump hooks” will also likely garner attention.
Resurgence of Project-Based Coins
The trend of low initial circulating supply and high Fully Diluted Valuation (FDV) has significantly impacted token price behavior. While low supply can lead to rapid price appreciation in the early stages, it also creates selling pressure as tokens unlock, often through over-the-counter (OTC) trading.
Significant token unlocks are expected in the coming months, creating persistent selling pressure even if market sentiment improves.
Token Unlock Schedule for Selected Projects. Source: Token Unlocks
If capital flows back into project-based coins, it will likely favor:
- Established projects (OGs): Projects with a long track record and substantial circulating supply, particularly those with ongoing product development and updates, such as Uniswap and Aave.
- Trend-aligned projects: Projects related to prominent trends like AI, including tokens like WLD and FET.
- Layer-2 solutions on Ethereum and established Layer-1s: Projects with strong network effects, such as ARB, OP, SOL, SUI, and APT.
While high FDV, low initial supply coins can be volatile, a resurgence after a prolonged downturn is possible. To mitigate risk, investors should prioritize projects with disclosed valuations from early funding rounds.
Renewed Focus on Top Meme Coins
Year-to-date, top-performing tokens have largely consisted of meme coins and tokens within the Solana ecosystem. The surge in leading meme coins has spurred capital flow into smaller meme coins. Thousands of new meme coins are created daily, primarily on low-cost, high-speed ecosystems like Solana and BSC.
Number of New Meme CoinsDaily New Meme Coin Creation Across Different Blockchains. Source: DexScreener
The influx of capital into smaller meme coins has fueled the growth of Telegram trading bots and anti-rug pull launchpads like Pump.Fun. However, the sheer volume of new meme coins creates a high-risk environment. For example, on Solana, while thousands of meme coins are launched daily on Pump.Fun, only a small percentage achieve sufficient liquidity for listing on decentralized exchanges.
PumpFun Statistics. Source: Dune Analytics
Given the selling pressure on high FDV projects, meme coins could continue to attract capital. However, focus will likely shift towards established meme coins with strong communities, such as DOGE and PEPE, or leading meme coins within thriving ecosystems like WIF on Solana and BRETT on Base. Market cycles are multi-year phenomena with various potential outcomes. Investors should be aware of the inherent risks and allocate capital accordingly.
