Bitwise Attributes Altcoin Surge to ETF Inflows

Bitwise’s Chief Investment Officer, Matt Hougan, attributed the simultaneous rise of Bitcoin and altcoins to the influx of new funds into the crypto industry via ETFs.

2/ IMO the primary driver of alt season is a classic «wealth effect.» Crypto natives make money in bitcoin, feel rich, and then look for more speculative assets to invest in.

— Matt Hougan (@Matt_Hougan) March 8, 2024

«There is much discussion about the early start of altcoin season. Some are surprised by this, considering Bitcoin is “only” up a few hundred percent from its low. The primary driver of alt season is the classic “wealth effect.” Crypto investors make money in Bitcoin, feel wealthy, and seek more speculative assets to invest in,» he explained.

According to the expert, a similar phenomenon occurs in the traditional economy, where people earn money from large companies and then look for smaller firms for venture investments.

4/ What catalyzes alt season is not the percentage return of bitcoin but the cumulative size of the wealth effect. And since the November 2022 lows, bitcoin’s market cap has grown by $1 trillion. $1 trillion is a lot of money!

— Matt Hougan (@Matt_Hougan) March 8, 2024

«They also visit Vegas more often. Market rotation and “wealth effects” are as old as time. Alt season is catalyzed not by the percentage return of Bitcoin but by the cumulative “wealth effect.” Since November 2022, Bitcoin’s market cap has grown by $1 trillion — that’s a lot of money,» Hougan explained.

Thus, wealthy crypto investors move their earnings from the leading cryptocurrency into other digital assets. Many altcoins are relatively small, so it doesn’t take much money to drive up their prices, he added.

«An additional and more exciting catalyst is the significant improvement in technological infrastructure for altcoins in past cycles. The Dencun upgrade in Ethereum and the development of second-layer solutions are real technological achievements,» noted the Bitwise CIO.

Hougan explained that the current bull market differs from previous ones. Historically, alt season limited Bitcoin’s growth as capital shifted from the leading cryptocurrency to others. However, the 2024 rally is driven by external money entering the ecosystem through ETFs.

12/ Historically, alts season capped the rise of bitcoin as marginal capital shifted out of bitcoin into the rest of the market.

But Bitcoin’s 2024 rally is being driven by entirely new money — non-crypto-native money — flowing into the ecosystem via ETFs.

— Matt Hougan (@Matt_Hougan) March 8, 2024

According to him, the trend will continue as long as more funds flow into Bitcoin from ETFs than flow out into other cryptocurrencies. The result will be an “all-season” instead of a classic altcoin season.

«Lastly: be careful. Many terrible projects are funded in bull markets, and many are already overvalued. Of course, there are also great projects. But not everything that rises deserves it,» concluded the expert.

Previously, Hougan predicted Bitcoin would rise above $80,000 in the foreseeable future due to the success of ETFs.

In March, the author of the bestseller “Rich Dad, Poor Dad” and entrepreneur Robert Kiyosaki predicted digital gold would reach $300,000 in 2024.