Bitcoin maxis altseason is about to begin as BTC turns institutional.
The arrival of Bitcoin (BTC) exchange-traded funds (ETFs) has changed everything, but not only for institutions. It's created a polarized market for retail crypto investors, and we're about to see a major rebalancing as a result.
On the one hand, we now have mom and pop investors with exposure to Bitcoin through their advisors investing in BTC ETFs for the first time. It's only a matter of time until Bitcoin becomes as common as gold in these household portfolios. On the other hand, we have the “OGs” of the crypto market – those who have been around since the early days and are fully subscribed to the Web3 ethos. They invest in Bitcoin because it is decentralized and censorship resistant. But now that every man and his dog is adding Bitcoin to their portfolios, they've lost their first-mover advantage — and they're about to revolt.
From the point of view of an early Bitcoin investor, the world's largest crypto investment has moved away from its original purpose – to replace the existing broken payment system. Unwittingly, he has now become part of the very system he was designed to overthrow. It's a little like discovering a hidden gem of a restaurant, only to see it explode in popularity and be taken over by a large corporation. The quality drops, the original purpose is forgotten, and you struggle to find a place at the table.
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It's not just about Bitcoin's purpose though. As buyers vie for an ever-increasing supply of this limited resource, even the 25 basis points they earn for managing a BTC spot ETF will rise in the billions, but it will be the big boys who benefit. . Of course, crypto-savvy retail buyers can still get their hands on Bitcoin directly through crypto exchanges, but leaving most of the profits to the world's largest asset managers is not something Web3 has ever been.
So we're looking at the state of the crypto market for mom and pop investors who are willing to pay the ticket price to ride the Bitcoin train and who are used to getting this ride for free. These latter investors don't stick around to see if the journey is worth the payoff, they simply go elsewhere – a part of the market that stays true to crypto ethics and offers access to the blockchain world free of intermediaries.
This will be the catalyst for the highly anticipated altcoin season. Bitcoin maxis diversifying their portfolios, crypto OGs looking for bigger and better returns as Bitcoin goes mainstream, and true believers in the dream of crypto decentralization.
So far, altcoins have lagged Bitcoin in terms of performance, as usual in this part of the cycle. But we are beginning to see signs of a reversal. Over the past 10 weeks or so, Ethereum (ETH) has been posting higher and higher lows against Bitcoin, which means we may be in for some time in the coming weeks. When this happens, altcoins will follow – as they always do – and it will be Bitcoin investors looking for alternatives that will drive this transition.
In fact, as more institutions dive into bitcoin and more traditional investors add it to their portfolios, the more polarized the crypto retail market becomes. And with this resurgence into altcoins, we'll see many of them rise to the “too-big-to-fail” level, which until now has only been the domain of bitcoin. This cycle will be a crucial step in separating the wheat from the chaff and determining which alt will live to see another bull market.
Related: Curb your enthusiasm – crypto prices don't move as fast as you think.
This does not mean that every crypto-savvy retail investor will shun Bitcoin entirely. After all, altcoin investing requires a relatively strong stomach. For most, Bitcoin will be the balance – the safe and less volatile core of their portfolios that provides a buffer against higher risk investments. But as the Bitcoin behemoth grows, we can expect the asset to lose some of its most dedicated OGs as they go for more decentralized options and bigger profits.
However, this rebalancing makes one thing clear: the institutions will profit either way. Even a large retail withdrawal has very little impact on BTC's price direction right now – the scarcity, growing demand and billions in institutional income will take care of that.
However, it will have a significant impact on the future of the decentralized finance (DeFi) market. Locked in at just over $100 billion in total value (TVL) to date — compared to Bitcoin's growing market cap of $1.4 trillion — the relatively insignificant pivot to altcoins will have a big impact on DeFi's growth. If the Bitcoin maxis turn to altcoins with the same enthusiasm they have given to BTC since its inception, we are about to see some explosive growth in altcoins. Whatever side of the camp you find yourself on, get ready for an exciting summer.
Lucas Kiely is the guest author and Chief Investment Officer of Generation App, which tracks investment portfolio allocations and leads the expansion of its diversified investment product range. He was previously Chief Investment Officer at Diginex Asset Management, and was Senior Trader and Managing Director, QIS and managed the structured derivatives business at Credit Suisse in Hong Kong. He was Head of Special Derivatives at UBS in Australia.
This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.
