The highly anticipated Ethereum ETF launch is upon us, and investors are scrambling to position themselves for potential gains. Traditionally, altcoins (alternative cryptocurrencies) have been seen as a way to gain leveraged exposure to Ethereum’s price movements. However, recent analysis suggests a surprising truth: altcoins might not benefit as much as expected from the ETF launch, and Ethereum itself could outperform them.
A Multi-Year Trend: Altcoins Lag Behind Ethereum
Thor Hartvigsen, an on-chain analyst, points out a crucial observation: the total market capitalization of altcoins compared to Ethereum has been steadily declining for several years. This indicates a long-term trend where Ethereum has been gaining dominance over the broader altcoin market.
Why Altcoins Might Not Be the Best “Leveraged Play”
Many investors believe that altcoins offer a way to amplify Ethereum’s price movements. However, Hartvigsen argues that finding specific altcoins that consistently outperform Ethereum is difficult. His analysis reveals that, year-to-date, Ethereum has actually surpassed many altcoins across various categories, including Layer 2 tokens, alternative Layer 1 blockchains, Decentralized Finance (DeFi) projects, and even meme coins.
The Data Tells a Different Story
A closer look at the data reveals some interesting insights. While some altcoins, like TON, BNB, PENDLE, ENS, MKR, PEPE, and SHIB, managed to outperform Ethereum, the correlation between their prices and Ethereum’s price is surprisingly low. Most of these outperformers have a correlation of less than 60% with ETH. This suggests that their price movements are influenced more by other factors, such as Bitcoin’s price or unique project-specific developments.
Volatility Doesn’t Guarantee Higher Returns
Another factor to consider is volatility. Traditionally, altcoins have been seen as more volatile than Ethereum, potentially offering higher returns. However, Hartvigsen’s analysis shows that only a few altcoins have significantly higher volatility than Ethereum. This means that even if Ethereum rallies after the ETF launch, there’s less potential for a significant upside surprise from most altcoins.
A Safer Alternative for Leveraged Exposure
For investors seeking genuine leveraged exposure to Ethereum, Hartvigsen suggests a more straightforward approach: using leverage within a DeFi platform like Aave. By taking a 2x long position on Ethereum within Aave, investors achieve a 100% correlation with Ethereum’s price movement and a beta value of 2, effectively amplifying their gains (and losses) along with Ethereum’s price.
Conclusion: Invest Strategically, Not Speculatively
The Ethereum ETF launch is a significant event for the cryptocurrency market. However, investors should be cautious about blindly assuming that all altcoins will benefit equally. As the data suggests, Ethereum itself might outperform many altcoins, and some altcoins might not offer the leveraged exposure investors seek. By doing their research and understanding the underlying trends, investors can make informed decisions and position themselves strategically for potential gains in the evolving crypto landscape.