2021-05-10 09:26:55

Ethereum ($ETH) Dogecoin ($DOGE) Binance Cryptocurrency Price Warning Sounds

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Parabolic jumps in digital tokens such as Ether, Dogecoin and Binance Coin are outshining Bitcoin, prompting more questions about whether that segment of the cryptocurrency sector is ripe for a reckoning.

The rallies have contributed to a slump in Bitcoin’s share of the $2.6 trillion crypto market to 43% from about 70% at the start of 2021, a metric that for strategists at JPMorgan Chase & Co. and DataTrek Research LLC may be a warning sign of investor excess in a range of digital tokens.

Bitcoin’s waning dominance carries echoes of “froth” to the extent it’s being fueled “by a rally in other cryptocurrencies driven more by retail demand,” a JPMorgan team led by Nikolaos Panigirtzoglou wrote in a note Friday. DataTrek’s co-founder Nicholas Colas has indicated that history suggests tokens outside Bitcoin can drop “pretty quickly” when Bitcoin’s share hits 40%.

Plenty of commentators have been fretting for some time that a stimulus-fueled peak is at hand in cryptocurrencies — only to see them rally even more. But the worry is hard to shake in a sector that defies traditional investment analysis.

The share of the largest cryptocurrency could be declining because investors are getting more comfortable with a wider array of tokens. Alternatively, retail traders may be chasing quick, speculative gains.

“Even if you don’t invest in the space, this is worth tracking,” DataTrek’s Colas wrote in a recent note. He added that with more than $2 trillion now invested in virtual currencies, “a meaningful reset lower could also affect more traditional financial assets like equities.”

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