Crypto: Altcoins are soaring, but for how long?

The altcoin market is going through a phase of exceptional growth, which is arousing enthusiasm among investors and arousing caution among analysts. In recent weeks, several cryptos, including Hedera, Cardano and XRP, have seen their value soar by more than 250% in just one month. Such renewed activity is accompanied by a significant increase in the financing rates of perpetual contracts, which reach levels not observed for nine months. This trend, although promising, raises crucial questions. Do current performances herald a new “altseason”, marked by a lasting rally? Or do they signal a speculative frenzy likely to destabilize the market?

A surge in altcoins and unprecedented funding rates

Altcoins have currently seen a dramatic surge in their prices, which is a significant milestone in the evolution of the crypto market. Among the most notable examples, assets such as Hedera, Stellar and XRP have seen their valuations skyrocket, with increases exceeding 250% in just 30 days. This rapid rise is largely based on strong activity around perpetual contracts, where monthly funding rates currently range between 4% and 6%. Thus, these figures reflect a marked appetite among investors for risk, fueled by the hope of quick gains.

However, this dynamic is accompanied by significant risks. When funding rates reach such levels, the costs associated with holding positions can quickly eat into traders' margins, especially if prices stop rising or begin a decline. A similar phenomenon occurred last January, during a rally that abruptly ended after a 15% correction. This historical precedent sheds further light on the potential dangers of increased use of leverage. While some see this situation as an opportunity to take advantage of a booming market, others call for caution, and emphasize the need to remain attentive to volatility and warning signs of a possible correction.

A marked contrast with the market leaders: bitcoin and ethereum

While altcoins are experiencing a spectacular surge, bitcoin and ether are showing more measured momentum. Funding rates for these two flagship cryptos remain modest, around 2.5%. This relative stability contrasts with their recent performances, marked by significant monthly increases of 39% for bitcoin and 49% for ether. Such divergence is partly explained by investors' preference for more diversified financial instruments, such as monthly futures or options, which help limit risk and capitalize on price fluctuations.

At the same time, the excitement around altcoins has been exacerbated by the rapid emergence of certain memecoins, including Goatseus Maximus and Cat in a Dog's World. Indeed, they briefly reached market capitalizations that exceeded a billion dollars. This type of speculation, although temporarily lucrative for some, calls into question the viability of the underlying projects. However, these speculative assets often benefit from ephemeral hype, which poses the risk of a sudden reversal. This frenzy around memecoins and altcoins could, ultimately, weaken the entire market, amplify volatility, and push valuations towards levels that are difficult to sustain. Observers warn of the potential impact of such dynamics on the overall stability of the crypto ecosystem.

Ultimately, recent crypto market history shows that high levels of funding are often followed by significant corrections, which adds a dose of uncertainty to the current situation. This uncertainty requires investors to take a measured approach, keeping in mind the increased volatility that characterizes this sector. On one hand, the strong fundamentals of some altcoins could support a sustainable bull cycle, driven by innovative projects and growing adoption. And on the other hand, an increase in liquidations caused by excessive use of leverage could lead to a sharp correction.