Why Are Only Small-Cap Coins Surging & Large-Cap Crypto’s Looking like ‘Trash’
In the past month, a lot of cryptocurrencies have popped and run a good rally. Dogecoin was covered by the mainstream media when zoomers on Tik Tok made it their mission to take this altcoin to $1 which wasn’t realized, but its volume surely skyrocketed with coins dormant for three years also getting active.
Today, Tesla CEO Elon Musk yet again gave DOGE a push after meming about Dogecoin standard eclipsing the financial standard being “inevitable.”
This week was meanwhile captured by XLM, which decoupled from Bitcoin to jump 25%. The social volume of the cryptocurrency hit an 8-month high last week, “foreshadowing this run-up.”
These greens have the DeFi token KNC seeing the “largest token age consumed spike of its ~3 year history” which was also its “largest 3-mth deviation of any of the top 100 assets.”
“Usually, a spike this large is one of the best leading indications of a long-term price direction shift,” said Santiment. These gains were the result of Kyber Network’s Katalyst upgrade and staking.
The winner of 2020 so far, however, is Aave which is up 3,185%. The project is becoming a “VC darling” as this week, it announced the sale of $3M worth of LEND tokens to crypto funds Three Arrows Capital and Framework Ventures just a week after $4.5 million investment from ParaFi.
Aave’s native LEND token has been in high demand throughout this year with the number of daily transactions increasing by almost 10x. It’s large translation volume also hit an ATH at $26 million, double the previous peak. But soon it dropped which signals the most recent LEND rally is driven by retail investors.
However its holders are dropping, a decrease in the number of addresses with a balance means holders are realizing profits by selling their LEND tokens.
However, its growth is still more than just speculation based, “as the team has shipped innovative solutions and managed to substantially grow the usage of its lending protocol,” states The Defiant. It further notices that “on-chain indicators suggest that the current rally may be over-extended as retail users enter the frenzy and large players appear to be selling.”
Do Not FOMO
This past month, coins like Elrond network jumped 300%, Synthetix 200%, Aave 190%, Ampleforth 140%, Kava 137%, Swipe 123%, bZx Protocol 121%, VeChain 06%, LINK 95%, Celsius Network 95%, Compound 90%, Bancor 87%, TOMO 68%, THORChain 65%, Atom 62%, Cardano 51%, Kyber Network 50%, REN 47%, Algorand 44%, and Stellar 41%.
Amidst all these gains, one should refrain from FOMOing, advises economist and trader Alex Kruger. The key rule in trading is peace of mind as one can't make good decisions if feeling FOMO, he said.
“Fine to chase if trading short-term. Have stops, move them to breakeven if trade works. If not speculating short-term, best to pick a few levels, adjust higher if price moves higher, and wait for corrections. Corrections always come. Particularly in illiquid cryptos,” Kruger said.
He added: “You'd have a very hard time not finding an asset that gives you another entry, over and over and over again.”
Moreover, what's worth noticing is that these gains are primarily recorded by small-cap cryptos. Out of the large-cap altcoins, Ethereum (ETH), XRP, Bitcoin Cash (BCH), BSV, Litecoin (LTC), EOS, and Cardano (ADA), every crypto “besides ETH and ADA look like trash,” said trader DonAlt.
Most majors (besides ETH and ADA) look like absolute trash.
Do you think they do so because they're just bad altcoins, do you think it's because this altcoin rally is fake, or do you think it's because of other factors?
— DonAlt (@CryptoDonAlt) July 17, 2020
“They're bad altcoins,” said trader The Crypto Dog. “Money is flowing from old narrative bullshit (interbank settlement, digital silver) to new narrative bullshit – DeFi.”
This fund rotation, however, may turn out to be good for cryptos by being the start of another bull run.
He added: “Enough DeFi euphoria though will kickstart a bull run and eventually all of the garbage can get swept up and run with that.”