With the rally of the crypto market, altcoins have gained as much as bitcoin. Digital assets across the sector have been able to return to their pre-FTX collapse levels, signaling the start of a bull run. However, as the market begins to settle into this new normal, investors are taking advantage of large cap assets to take advantage of potential price volatility in smaller altcoins.
Money cycling for small cap altcoins
A recent report from on-chain data aggregation website Sentiment shows Investors may be pulling money out of large cap coins like Cardano and Solana and going towards small cap coins. It presents a picture of rotation of funds rather than direct withdrawal from the crypto sector.
Sentiment noted that large gains such as Solana, Cardano and Polkadot are now being transferred to smaller altcoins. Most of these coins are coins in the top 200 and below with a market capitalization of less than $300 million.
The cycle of wealth in these smaller altcoins is shown by their address activity. The image shared by Sentiment shows a significant increase in address activity for these coins. Most notably, last week saw an uptrend as many of these large cap coins hit new local peaks.
Money flows from large caps to small cap altcoins. source: feeling
The small cap coins mentioned in the report are TRADE, RBN, SLP, PLSPAD, POND, MITX, MTH, and CBG. Most of these are coins flying under the radar. Ribbon Finance (RBN) which is the top of the list only has a market cap of $139.7 million but has gained 24% in the last seven days.
What happens to these tokens?
The coins mentioned by Sentiment are still small enough to see major movement with a fraction of the amount needed to move the prices of the likes of SOL and ADA. This means that if this rotation of gains from large cap to small cap altcoins continues, these tokens could see positive momentum in the coming days.
However, for coins with such a low market cap, just as it is easy to pump up their prices, it is equally easy to drag their prices down with some big holders selling. This becomes a double-edged sword for investors following the movement. On one hand, this can mean huge profits in a short period of time, but on the other hand, can see them losing money fast.
One good thing about this though is that the focus is being spread rather than just focusing on a handful of coins. As wallet activity for these altcoins increases, it may trigger exploration into similarly priced altcoins that may benefit from the new interest.
Crypto market cap surpasses $1 trillion as investors move money around Source: Crypto Total Market Cap on TradingView.com
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