Kraken has released its April 2021 report showing that the market is preferring altcoins to Bitcoin.
Indeed, the report notes that bitcoin has seen its dominance fall below 50% (this has not happened since 2018), while conversely altcoins are outperforming bitcoin. Ethereum in particular is experiencing a moment of glory, dragged by the boom in NFTs and DeFi, which marked $66 billion in TVL as of April.
However, bitcoin is reportedly consolidating its position towards new all-time highs. This suggests demand from institutional investors remains high, according to Kraken.
Bitcoin vs. Altcoins
As for bitcoin, Kraken notes that after the all-time high of $65,000, a correction followed with a 28% loss that took BTC to $47,000. Although Bitcoin lost 2% in April, Kraken notes that this month concludes a six-month rally in which the price of bitcoin rose 445%.
However, the drop in dominance to the lowest point since December 2017 coupled with a 5% drop in volumes in April shows that this is a good time for altcoins.
The queen of altcoins is Ethereum, which experienced a spectacular month of April that took it over $2,500. However, it was also a rather volatile month, with a 32% rise followed by a 23% drop. Also dragging Ethereum’s price down was the launch of ETFs in Canada. All this while preparatory work for the launch of Ethereum 2.0 and the advent of Proof of Stake continues.
According to Kraken, which analyzed the Logarithmic Regression Rainbow, all the conditions are in place for Ethereum to soon reach $5,200. ETH has already broken through the $4,000 mark.
Other altcoins
April was also a banner month for Cardano, Polkadot and Uniswap. All of them set all-time records.
However, Dogecoin deserves a separate mention as it increased its price by 500% in April with volatility reaching 442%. However, Dogecoin has a concentration problem: 107 addresses hold 67% of the outstanding DOGE while 3.7 million addresses have only 1.6% DOGE.
Speaking of Dogecoin, Thomas Perfumo, Head of Business Operation & Strategy at Kraken, explains:
“The overarching narrative behind the coin’s 30x run this year is a protest against systemic inequities in the traditional financial industry – Dogecoin is, after all, the original ‘meme asset.’ This is an extension of the value that cryptocurrencies derive from vibrant and growing communities that give rise to network effects”.
Ultimately, bitcoin ended the month in the negative unlike altcoins, and according to Kraken there is an explanation.
Users may have preferred to convert their bitcoin into altcoins, hoping for high returns. This also justifies the steady decline in dominance, which has been below 50% for some time now. Put another way:
“This ongoing rotation into altcoins can perhaps be explained by market participants consciously choosing to venture further out on the“crypto risk curve” and coming to terms with “The Law of Large Numbers.” That is, as BTC gets larger and larger, it cannot sustain the same growth. Therefore, market participants may see altcoins as having a greater upside and/or a better risk-reward profile”.
