Many scary cryptocurrencies are fueled by ‘crazy speculation’, warns Bitwise exec
Bitwise Chief Investment Officer Matt Hogan has warned investors to approach high-value crypto projects with skepticism as “wealth effects” are occurring in the crypto market. It indicated that traders are moving part of their Bitcoin (BTC) into other crypto investments, driving up prices in the market.
In a recent series of posts on X, Hugan explained that Bitcoin's recent price surge has led investors to spread their profits across more questionable crypto tokens, which may give them a false sense of legitimacy.
“Be careful out there. A lot of scary projects get funded in spectacular bull markets and many are already trading at crazy prices.”
Cointelegraph reports that altcoins such as memecoins and artificial intelligence (AI)-driven cryptocurrencies outperformed BTC in the week to March 7.
Hugan reiterated that investors gained confidence after their Bitcoin investment increased, leading them to choose riskier assets in hopes of higher returns.
“Crypto natives make money in Bitcoin, feel rich, and look for more speculative assets to invest in,” he said.
This comes after Bitcoin hit a new all-time high of $70,184 on March 8.
Cointelegraph reported at the same time that Charles Edwards, founder of quantitative bitcoin and digital asset fund Capriole Investments, believes Bitcoin's new all-time high is “fairly priced.”
Hugan also countered the widespread discussion of the announcement's surprise, saying that bitcoin is up “a few hundred percent from its lows.”
He pointed out that interest in the altcoin market is driven by the total market capitalization, not the percentage of bitcoin returns.
“It is not the percentage return of bitcoin that will fuel the alt season, but the cumulative effect of the asset. Since the November 2022 low, Bitcoin's market cap has grown by $1 trillion.
Meanwhile, he explained that when the price of Bitcoin increased in the past, the percentage increase was high but the amount of wealth generated was relatively low.
“Comparatively, in previous cycles, the amount of wealth generated by the accumulation of bitcoins at this stage in this cycle was small in absolute dollar terms, although it was large in percentage terms,” he explains.
Related: Bitcoin traders expect new highs as stable coin arrives on exchanges
Given the amount of fraud in the crypto industry, the sense of skepticism towards unknown crypto projects is high.
In the year On December 28, 2023, blockchain security platform Immunefi reported that a total of $1.8 billion was lost to Web3 hackers and fraudsters in 2023.
As investors scrutinize project founders and developers to determine whether a project is worth investing in, it is expected to become more challenging as AI evolves.
Jesse Leclair, blockchain analyst at CertiK, warned Cointelegraph that scams are on the rise and users should be on the lookout for well-executed exploits.
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