Why Altcoins Zoomed Higher Again This Week

    Is there ever a possibility that altcoin prices will adhere to the laws of gravity? It would be understandable if an investor believed that they would continue to skyrocket into space indefinitely, considering the prolonged rally in their prices that took place this week. While not every altcoin experienced such a remarkable surge, quite a few saw a substantial increase in value.

    For instance, based on data compiled by S&P Global Market Intelligence, BNB witnessed a double-digit gain, rising by 16% during the period. Similarly, MultiversX, a multiverse digital currency, and Optimism’s token, a transaction bundling-chain, also advanced by the same percentage. Theta Network, another notable altcoin, saw a nearly 10% increase.

    A shift in strategy and a significant purchase by MicroStrategy

    Many factors contributed to the ongoing rise of altcoins, but perhaps one of the most significant factors is reallocation. Analytical data from Coinalyze, a crypto-trading analysis platform developer, revealed a sharp increase in open interest (the number of trades that have not yet been closed) for altcoins from January 2022 to the present, accompanied by a corresponding decline for Bitcoin (CRYPTO: BTC), the original and most popular cryptocurrency.

    Moreover, Bitcoin experienced a slight surge in price in the middle of the week. Michael Saylor, co-founder and board chairman of MicroStrategy (NASDAQ: MSTR) and one of the most prominent supporters of the coin, announced that his company had made yet another substantial investment in Bitcoin, totaling nearly $616 million. This significant investment was enough to positively impact the price of almost any asset.

    As often happens when a sudden and significant event occurs, Saylor’s announcement had a temporary effect, leading investors to take profits and subsequently causing a retreat in the Bitcoin price. This retreat only served to make altcoins more appealing to many investors, fueling the continuous rally.

    Naturally, cryptocurrencies wouldn’t enjoy popularity if the macroeconomic environment was unfavorable. The latest inflation figures released by various governments, including our own and that of the U.K., suggest that rising prices are tempering. This increases the likelihood of interest rate cuts in the new year, which typically encourages the market to pursue riskier investments, such as cryptocurrencies.

    Buyers should exercise caution

    Although this rally has been ongoing for quite some time now, investors must remain cautious in the current environment. This is particularly true for more obscure and volatile altcoins, many of which contribute little to no practical value to the underlying blockchains. It is crucial to be careful rather than succumbing to casual greed during this period.

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