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Matt Hougan, Chief Investment Officer (CIO), warns users to be careful and believes all cryptos do not deserve the significant price rise they currently experience.
Chief Investment Officer at Bitwise, Matt Hougan, advised crypto investors to approach crypto projects more carefully, as he is skeptical about the current high valuations. He adds that the wealth effect is currently prevalent in the crypto market.
The Perspective of Matt Hougan
Hougan explained his views with the help of a recent series of posts on X. He said that Bitcoin’s most recent price surge has attracted investors to spread their profits across other skeptical crypto tokens. The ongoing bull run in Bitcoin supports the bull run in other cryptocurrencies and potentially gives them a false sense of legitimacy.
To express his views, Hougan said, “Be careful out there. Lots of terrible projects get funded in exuberant bull markets and many are already trading at crazy valuations.”
Movement in the Altcoins
Growth of Other Cryptocurrencies
This week, it has been observed that other cryptocurrencies, including altcoins and meme coins, are benefiting from Bitcoin’s growth. Those coins grew faster than Bitcoin. The growth in prices of some of the popular cryptocurrencies in the last week is as follows:
DOGE 20.88% FET 73.43%
SHIB 109.26% BONK 28.68%
BTC 9.81% ATOM 18.30%
XLM 12.69%
Hougan has considered the reason for this substantial growth as the increase in confidence after an increase in their Bitcoin investment, promoting users to select riskier investments in the lure of higher returns.
“Crypto natives make money in Bitcoin, feel rich, and then look for more speculative assets to invest in.”
With the above statement, he is highlighting the excitement around crypto investments. A user first invests in Bitcoin, earns returns, and gets attracted to other crypto projects that do not hold the same growth potential as Bitcoin.
Amid this growth, Bitcoin was able to mark its all-time high of $70,184 on March 8.
Charles Edwards, the founder of Capriole Investments, a quantitative Bitcoin and digital asset fund, believes that Bitcoin is now reasonably priced and its new all-time high was expected.
However, Hougan is challenging the widespread discussion about the hype, given that Bitcoin has grown a few hundred percent from its lows.
Hougan added that Bitcoin’s rate of return does not drive interest in the altcoin market. It is growing because of the increase in total market capitalization.
Hougan said, “What catalyzes alt season is not the percentage return of bitcoin but the cumulative size of the wealth effect. And since the November 2022 lows, bitcoin’s market cap has grown by $1 trillion.”
The wealth generated during the previous Bitcoin spike was much lower than that of the current wealth generation despite the higher price increase in Bitcoin prices in percentage terms.
Increase in Vulnerabilities Around Crypto
Looking at the existing number of crypto scams, there is a higher level of skepticism about crypto projects. At the end of 2023, it was reported that $1.8 billion were lost in hacking and scamming.
Investors need to scrutinize project founders and developers to verify whether the project is worth investing in. It will become challenging with the emergence of AI.
A blockchain analyst from Certik, Jesse Leclere, has also warned users that hacks and scams are becoming more advanced and users should be careful and well-educated about the developments.
Amanda Shinoy is one of the few women in the space invested knee-deep in crypto. An advocate for increasing the presence of women in crypto, she is known for her accurate technical analysis and price prediction of cryptocurrencies. Readers are often waiting for her opinion about the next rally. She is a finance expert with an MBA in finance. Quitting a corporate job at a leading financial institution, she now engages herself full-time into financial education for the general public.
