Traders sour on altcoins

Winter is coming.

No, we aren’t referring to the 4 pm sunsets and Mariah Carey blasting in every CVS in America: We’re talking about a new crypto winter.

Bitcoin’s rapid decline over the past month has completely erased its year-to-date gain, pushing the king of crypto to its lowest level since April. While Wall Street’s acceptance sparked the crypto’s surge at the beginning of the year, anxiety about the macro environment and the Fed opting not to cut rates drove a sharp sell-off in mid-October. So sharp, in fact, that $1 trillion in market value was wiped out across various tokens on Oct. 10 alone, according to Bloomberg.

Bitcoin hit a death cross this weekend, sparking fears that have now spread to another corner of the digital asset market: altcoins

Over the weekend, the MarketVector Digital Assets 100 Small-Cap Index, which tracks the 50 smallest digital assets, plummeted to its lowest level since November 2020, according to Bloomberg.

Zoom out: While bitcoin and ethereum are already known as volatile trades, their smaller counterparts, like Dogecoin, XRP, and Litecoin, are even riskier bets. The altcoin sell-off shows that retail traders may be taking a step back from the most speculative forms of crypto trading, especially as it gets easier and easier to trade the classic blue-chips.

An altcoin sell-off spells bad news for one group: exchange-traded fund issuers vying to launch their own altcoin ETFs. Nearly 130 ETF applications giving investors access to altcoin investments are currently pending with the SEC, according to Bloomberg. The ETFs linked to altcoins that are already on the market are struggling to attract investor inflows, leaving the future of these altcoin applications in question.

The crypto craziness is just getting crazier

But a broad crypto sell-off hasn’t stopped Wall Street from taking more pages out of the crypto playbook.

Just today, Bloomberg reported that a derivative product called the perpetual swap, which pretty much enables peak degeneracy, may soon be introduced to the US market. The so-called “perp” allows traders to take long or short positions on stocks leveraged as high as 100x without actually ever owning the asset, all through the magic of cryptocurrency.

Perps have grown popular in the crypto trading world, and firms like Jane Street are taking notice, according to Bloomberg. While you can’t trade equities via perps just yet, developers are quietly making the Nasdaq 100 and some companies like Tesla and Coinbase available to traders.

But if even the boldest of investors are becoming wary of altcoins, perhaps perps will finally be a bridge too far.—LB