JPMorgan is concerned about ‘frothy’ cryptocurrencies such as Cardano and Solana, but is there reason to be?

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Warren Buffet, the Oracle of Omaha, reportedly remarked, “Be scared when others are greedy, and greedy when others are fearful.” Taking a contrarian stance might be daunting, but it frequently leads to excellent income opportunities.

Should you be wary of altcoins?

It may be argued that in recent weeks, the price appreciation of several cryptocurrencies has eclipsed Bitcoin’s own development. Consider this: altcoins make up roughly 33% of the whole cryptocurrency market. This is up from only 22% at the beginning of August. Nonetheless, the rise of cryptocurrency market dominance has some, including as JPMorgan analysts, concerned.

In a recent note to their clients, JPMorgan analysts cautioned users about the August trading boom. This surge saw spot market trading volumes surpass the $1T mark. The blog noted,

“That buying frenzy in stocks also spilled over into “altcoins” in August as investors piled into non-fungible tokens. The surge in NFTs and DeFi activity has helped not only Ethereum, but also cryptocurrencies that facilitate smart contracts such as Solana, Binance Coin, and Cardano to soar.”

Needless to say, Solana and Cardano saw a significant increase in their price rallies. Especially the former, with Solana up more than 7,000% year to date at the time of publication. In terms of NFTs, OpenSea, one of the leading NFT markets, has witnessed trade volumes on its platform climb by more than 76,000 percent since the start of 2021. In fact, its trade volume just topped $4 billion.

See also  Cardano, Ethereum, Polkadot Price Movement Analysis for 10th May, 2021

Along the same lines, there is an intriguing component that should be mentioned. The bank claims that

“… retail investor net flows into U.S stocks hit a record high of almost $16 billion in July and stood at about $13 billion in August. The previous record was $10 billion last June.”

Reddit-inspired day traders certainly played a crucial role in moving the market as well, the firm added.

It was in light of the aforementioned “madness” that JPMorgan’s executives opined,

“Cryptocurrency markets [are] looking frothy again”

The note went on to conclude,

“The share of altcoins looks rather elevated by historical standards and in our opinion it is more likely to be a reflection of froth and retail investor ‘mania’ rather than a reflection of a structural uptrend.”

Is there cause for concern, however? While the scale of the hikes surprised many, most would say that the likes of Cardano and Solana were hiking for good reasons. For example, the former is closing in on the Alonzo HFC event, which involves smart contracts. While the latter has been one of August’s best-performing cryptos, it has also outperformed other alts in terms of development and social sentiment.

See also  Cardano Price Movement Analysis for 13th June, 2021

Do fear and greed play a part in the crypto-market? 

History, perhaps, gives us the best response to the aforementioned question. Each time the crypto-market’s Fear and Greed index has fallen below 20, the market has undergone a reversal. Why? Because sentiments of “despondency” are often seen to be points of “Maximum Financial Opportunity.”

When markets are greedy, on the other hand, most traders are at the “Point of Maximum Financial Risk.”

Having said that, will these cautions deter investors, particularly traders, from profiting quickly from altcoins? No, not at all.

 

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