Decentralized finance (DeFi) and NFT-related altcoins have been enjoying double-digit gains in the past week as capital begins to flow from larger assets like bitcoin (BTC) and ether (ETH) into more speculative tokens such as blur (BLUR) and arbitrum (ARB). The recent rise of BLUR, the native token of its namesake’s NFT exchange, by more than 22% is a prime example. The increase followed a listing on South Korea’s Upbit trading platform and coincided with a significant spike in trading volume.
This sudden growth in alternative tokens is a stark contrast to just three weeks ago, when the Securities and Exchange Commission (SEC) was cracking down on altcoins labeled as securities. With Bitcoin currently trading above $30,000 after a fortnight of below $26,000 prices, traders are shifting their focus to lower liquidity trading pairs in search of more significant gains.
Another token, Near Protocol’s native NEAR, experienced more than a 20% price increase after signing a deal to use Alibaba’s cloud services. Similarly, Arbitrum has seen a 33.2% surge in the past 12 days due to increased activity on the layer 2 blockchain.
While altcoins are experiencing newfound growth and popularity, there are also possible downsides to their rise. For instance, the increased total value locked (TVL) on Arbitrum-based platforms like GMX and Radiant, at 12.5% and 9.3% respectively over the past week, might indicate that traders are overly confident in capturing DeFi yields, potentially leading to market volatility.
Besides that, open interest in bitcoin cash (BCH) markets, which represents the number of open derivatives positions on a specific asset, currently sits at a yearly high. This could suggest that investors are backing the recent rally with leveraged positions that may not fare well in sudden market shifts, leaving them exposed to higher risk.
Even so, the altcoin market’s growth reveals a revived interest in the lesser-known cryptocurrencies. Traders are gradually shifting capital away from more prominent digital currencies like BTC and ETH to invest in these potentially high-return tokens, even as the risks associated with them are evident. It remains crucial for investors to exercise caution and perform in-depth research before venturing into these highly speculative assets.
Source: Coindesk
