Bitcoin profits are pushing traders into mim coins, says Bitwise Exec.

Why exactly are coins like Dogecoin (DOGE), Shiba Inu (SHIB) and Pepe (PEPE) suddenly gaining traction? Bitwise CIO Matt Hougan says there is a method to the madness.

“The primary driver of the alt season is the classic ‘result of fortune,'” Hogan wrote on Twitter Friday. “Crypto natives make money with Bitcoin, feel rich, and then look for more speculative assets to invest in.

Bitcoin (BTC), the longtime king of the crypto market, is up as much as 54%, thanks in large part to the new Bitcoin spot ETF around Broadcast, Fidelity and others – including Bitwise. The cryptocurrency, however, hit a new all-time high above $70,000 on Friday, up 11.5% over the past seven days.

Just as of this week, countless crypto runners are grinding fast: Ethereum (ETH) is up 16.4% at $4,000 even as the prospect of a US spot ETF remains uncertain. Meanwhile, dog-focused coins like DOGE, SHIB, and FLOKI — which were originally launched as a joke rather than for any purpose or utility — rose 31%, 145%, and 259%, respectively.

Hugan said the phenomenon is “like an anachronism” that plays itself out in traditional financial markets, where investors take profits in large stocks and invest in riskier small caps.

“It's not the percentage return of Bitcoin that's fueling the alt season, it's the cumulative amount of the wealth effect,” he explained.

Although Bitcoin's long-term percentage return has declined since its early and most volatile days, its absolute return relative to market capitalization has grown significantly. In February, for example, BTC hit its biggest intraday candle against the dollar despite a 45% jump in percentage terms.

Ironically, this created a pattern where altcoins outperformed BTC during the bull run, even though it was bitcoin that drove investors' profits to begin with – and it only gets stronger over time.

In the year As of November 2022, the asset's market value has risen by $1 trillion, giving Bitcoin investors a lot more money to gamble on altcoins. Also, since coins like PEPE are up 121% this week – with a lower market cap and trading more thinly, it doesn't take as much buying power to send it to the moon.

While the exodus from Bitcoin to altcoins may seem like a doozy to Bitcoin diehard HODLers, Hugan doesn't think the trend will end early on in the crypto bull run. After all, Bitcoin has a great new resource in the form of ETFs, which can make the “wealth effect” last longer.

“The result is more ‘everything' than the classic ‘alts season,'” he wrote. That is what we are seeing in the market and I suspect it will continue.

Edited by Andrew Hayward.