Crypto Altcoins Are Rekt - Here's Why

Summary

The video script delves into the volatile nature of the cryptocurrency market, highlighting the allure of altcoins for higher returns despite their risk. It emphasizes the importance of understanding the reasons behind altcoin volatility, such as novelty, market cap size, and narrative influence. The speaker encourages embracing volatility as a means to grow wealth and differentiates between various types of altcoins, from major layer ones to new meme coins, while stressing the stability and legitimacy of Bitcoin as a benchmark.

Takeaways

• 💰 Cryptocurrency markets are known for high volatility, which can be both a risk and an opportunity for investors seeking profits.
• 🚀 Altcoins offer higher potential returns compared to Bitcoin, but come with greater risk due to their novelty and market dynamics.
• 🛠 Understanding the reasons behind altcoin volatility is crucial for investors to make informed decisions and manage their investments effectively.
• 📈 Volatility can be an advantage for investors looking to buy low and sell high; it provides opportunities for significant gains in the market.
• 🌐 The crypto market is unique due to its low barriers to entry, high volatility, and the constant emergence of new tokens vying for attention.
• 🔍 Altcoins' novelty and lack of a simple, easily digestible concept like Bitcoin's 'digital gold' make them more challenging to assess and more volatile.
• 📊 Market cap size significantly influences volatility; smaller market caps mean prices can be easily influenced by a few large transactions.
• 📉 Low liquidity in smaller market cap coins can lead to dramatic price swings, including the potential for coins to drop by 99% or more.
• 📈 The potential for outsized returns, such as 10x or 100x, is more common in the crypto market due to its high volatility and new opportunities.
• 📝 Crypto narratives play a significant role in driving market sentiment and volatility; a strong narrative can quickly inflate or deflate an asset's price.
• 📊 The 'beta' concept from traditional finance applies to crypto, with altcoins having a high beta value in relation to Bitcoin, leading to amplified price movements.

Q & A

What is the main appeal of the crypto market for investors seeking high returns?

The main appeal is the potential for high returns due to the market's volatility, which can lead to significant price fluctuations and opportunities for profit.

Why is volatility considered a feature rather than a bug in the crypto market?

Volatility is considered a feature because it allows for larger price movements, which can be exploited by investors to buy low and sell high, thus increasing their potential for profit.

What is the suggested strategy for investors who want to start in the crypto market but may not have a large initial investment?

The suggested strategy is to start with altcoins, which can offer higher returns and then plow profits back into Bitcoin for long-term wealth storage.

Why are altcoins more volatile than Bitcoin?

Altcoins are more volatile due to factors such as their novelty, smaller market caps, lower liquidity, and the potential for rapid price manipulation by large buyers or 'whales'.

What is the role of narratives in the crypto market and how do they affect volatility?

Narratives are stories or ideas that drive investor interest and belief in certain assets. They can lead to increased volatility as they can cause rapid price increases when the market collectively believes in them, and just as quickly lead to price drops when the narratives lose credibility or attention shifts.

How does the concept of 'beta' from traditional finance relate to the volatility of altcoins in relation to Bitcoin?

In traditional finance, a high beta indicates a stock that moves more violently than the market benchmark. Similarly, altcoins with high beta values are more volatile than Bitcoin, the crypto market's benchmark, often moving more sharply in response to market sentiment.

What is the significance of Bitcoin's first-mover advantage and how does it contribute to its stability compared to altcoins?

Bitcoin's first-mover advantage means it has been around the longest, has the largest market cap, and is widely recognized and accepted. This contributes to its stability as it has more liquidity, is listed on major exchanges, and is increasingly being incorporated into traditional finance.

How can investors differentiate between various types of altcoins to find potentially solid projects?

Investors can differentiate by categorizing altcoins into subcategories such as major alternative layer ones, utility projects, and meme coins, and then assessing factors like market cap, utility, liquidity, and the strength of their narratives.

What is the potential risk of investing in low market cap altcoins or meme coins?

The potential risk includes extreme volatility, the possibility of pump-and-dump schemes, and the chance that the coin could lose nearly all of its value if investor sentiment or market conditions change rapidly.

Why might an investor choose to subscribe to a crypto market newsletter like 'Wealth Mastery'?

A crypto market newsletter can provide insights into the latest developments in altcoins, meme coins, Bitcoin, DeFi, NFTs, and market trends, helping investors stay informed and make better investment decisions.

What is the importance of understanding the market cap and liquidity of a crypto asset when considering its potential for volatility?

Understanding market cap and liquidity is crucial because assets with smaller market caps and lower liquidity are more susceptible to price manipulation and rapid price changes, which can lead to higher volatility and greater investment risk.

Outlines

00:00

🚀 Embracing Crypto Market Volatility for Profit

This paragraph introduces the allure of the crypto market, emphasizing the potential for significant profits despite the market's notorious volatility. It suggests that while Bitcoin is a safe bet for those with substantial capital, many opt for altcoins offering higher returns. The speaker encourages viewers to understand the reasons behind altcoin volatility, arguing that knowledge can help maintain composure during market fluctuations. The importance of volatility for wealth growth is highlighted, as it provides opportunities to buy low and sell high. The paragraph concludes by promoting a weekly newsletter called 'Wealth Mastery' that aims to keep readers informed about the latest in the crypto space.

05:01

📊 Understanding Altcoin Volatility and Market Dynamics

The second paragraph delves into the factors contributing to altcoin volatility, starting with their novelty and the associated uncertainty. It contrasts the established status of Bitcoin with the relative obscurity of many altcoins, which can lead to sharp market movements based on sentiment. The discussion then shifts to market capitalization, illustrating how smaller cap coins are more susceptible to price manipulation and dramatic shifts due to lower liquidity. Examples of coins with varying market caps are provided to demonstrate how size can influence volatility. The paragraph also touches on the impact of narratives in the crypto market, explaining how stories can drive investment and, consequently, price volatility.

10:02

🌐 The Role of Narratives and Market Perception in Cryptocurrency Volatility

This paragraph explores the concept of narratives in the crypto market and their impact on altcoin volatility. It explains how narratives, whether based on reality or speculation, can influence investor behavior and market trends. The discussion includes the example of the metaverse narrative and how it affected market sentiment in 2021. The paragraph also introduces the idea of 'beta to BTC', drawing a parallel with stock market terminology to describe how altcoins react more violently to market movements compared to Bitcoin, the benchmark. The importance of distinguishing between different types of altcoins and their respective volatilities is highlighted, suggesting that understanding these differences can help investors make more informed decisions.

15:05

🏦 Bitcoin's Unique Position and Lessons for Altcoin Investors

The final paragraph contrasts Bitcoin's stability and widespread acceptance with the volatility of altcoins. It outlines Bitcoin's characteristics, such as being the first cryptocurrency, having a simple utility, and a large market cap, which contribute to its relative stability. The paragraph also discusses the importance of liquidity and recognition in traditional finance, which further solidifies Bitcoin's position. It concludes by suggesting that the further an altcoin is from Bitcoin's attributes, the more volatile it is likely to be, encouraging investors to consider these factors when navigating the crypto market.

Keywords

💡Volatility

Volatility in the context of the video refers to the rapid and often unpredictable fluctuations in the price of cryptocurrencies. It is a key characteristic of the crypto market and is portrayed as both a risk and an opportunity. The video emphasizes that volatility allows for significant price movements, enabling traders to potentially profit from buying low and selling high. It is integral to the theme of the video, which encourages viewers to understand and embrace volatility as a feature of the crypto market.

💡Altcoin

Altcoin is a term used to describe any cryptocurrency other than Bitcoin. The script discusses altcoins as an alternative investment to Bitcoin, suggesting that they can offer higher returns due to their potential for greater volatility. The video also touches on the concept of moving along the 'altcoin risk curve,' indicating that as one moves away from Bitcoin to other cryptocurrencies, the potential for profit increases alongside the risk.

💡Risk Management

Risk management is the process of identifying, evaluating, and mitigating risks. In the video, it is implied that successful trading in the crypto market requires an understanding of the risks involved, particularly with altcoins. The script suggests that being prepared to handle the volatility and being able to stomach the risks are crucial for those looking to profit in the crypto space.

💡Bitcoin (BTC)

Bitcoin, often abbreviated as BTC, is the first and most well-known cryptocurrency. The video positions Bitcoin as a 'granddaddy' or 'Boomer coin' of the crypto world, suggesting its established status and relative stability compared to altcoins. Bitcoin serves as a benchmark for the crypto market, and the script discusses it as a potential long-term wealth storage asset.

💡Market Cap

Market capitalization, or market cap, is the total value of a cryptocurrency and is calculated by multiplying the current price of the coin by the total number of coins in circulation. The script uses market cap to illustrate the relative size and liquidity of different cryptocurrencies, noting that smaller market cap coins are more susceptible to price manipulation and volatility.

💡Novelty

Novelty in the script refers to the newness and uniqueness of certain cryptocurrencies, particularly altcoins. The video suggests that the novelty of altcoins contributes to their volatility because they are less understood and have more unknowns attached to them. This makes them more prone to dramatic price movements based on market sentiment and perception.

💡Narrative

In the context of the video, a narrative refers to the stories or themes that are associated with a cryptocurrency and influence investor sentiment. The script explains that narratives can drive the market's perception of a coin's value and potential, leading to increased volatility. For example, the metaverse narrative in 2021 led to significant price movements for related cryptocurrencies.

💡Beta to BTC

Beta, borrowed from stock market terminology, measures the volatility of a cryptocurrency in relation to Bitcoin. The video uses the concept of 'beta to BTC' to explain that altcoins tend to have a high beta value, meaning they are more volatile than Bitcoin and their price movements are more exaggerated in response to market trends.

💡Meme Coins

Meme coins are cryptocurrencies that are created as a joke or for fun, often based on internet memes or trends. The script discusses meme coins as a highly volatile and speculative part of the crypto market, with some examples like Dogecoin becoming established assets, while others may experience rapid price increases followed by sharp declines.

💡Utility Projects

Utility projects in the crypto space refer to cryptocurrencies that have a specific use case or function beyond mere speculation. The video mentions utility projects such as oracles, AI coins, and decentralized exchange tokens. These projects can have significant price swings and are part of the broader discussion on differentiating between various types of altcoins.

💡Liquidity

Liquidity refers to the ease with which an asset can be bought or sold in the market without affecting its price. The script points out that low liquidity in certain cryptocurrencies, especially those with smaller market caps, can lead to higher volatility, as even small trades can significantly impact the price.

Highlights

Crypto market volatility is a feature, not a bug, and can be an opportunity for profit.

Altcoins offer higher returns than Bitcoin but come with greater risk.

Understanding altcoin volatility is key to making informed buy and sell decisions.

Volatility is essential for wealth growth, allowing for buying low and selling high.

Cryptocurrency offers unique opportunities with low barriers to entry and high potential returns.

Bitcoin's established legitimacy contrasts with the novelty and uncertainty of altcoins.

Altcoins with low market caps and liquidity can experience dramatic price swings.

Narratives in crypto, such as metaverse or AI, drive market sentiment and volatility.

Altcoins with high beta values in relation to Bitcoin are more volatile.

Differentiating between altcoin categories can help identify solid projects.

Ethereum's evolution has led some to question if it should still be considered an altcoin.

Bitcoin's characteristics, such as being the first and having a proven track record, make it less volatile.

Meme coins, despite their playful nature, can establish long-term value in the market.

The crypto market's constant influx of new tokens contributes to its volatility.

Wealth Mastery newsletter provides weekly insights into the crypto space, including altcoin opportunities.

Altcoin volatility can be a positive for investors who can effectively navigate market swings.

Transcripts

so you want to make a big profit in the

crypto Market of course you do who

doesn't right but you need to be ready

for insane stomach churning volatility

but don't be afraid because it's

actually a feature of the crypto Market

not a bug a feature okay but where do

you start you turn to bitcoin you

certainly could if you're playing with a

big enough stack to start with but for a

lot of people it's logical to move out

along the altcoin risk curve where

returns can be higher and profits can

and then be plowed back into BTC for

long-term wealth storage as a strategy

it makes sense sounds easy right but you

have to be willing to stomach the risks

and the sometimes intense ups and

intense Downs oh everybody loves

volatility when it's upside volatility

not so much when it's downside because

altcoin trading is pretty damn nuts and

if you're doing the altcoin jungle game

then it's a good idea to understand

exactly why altcoins are so damn

volatile in the first place because if

you know why your bags are doing what

they're doing

it actually becomes a little bit easier

to stay calm when things get a bit crazy

in the market and to buy and sell at the

right times or just hold through the

turbulence if that's your plan too but

before we go through why altcoins are

volatile let's just recap a little bit

why we should learn to love volatility

volatility is your friend whether you

want to believe it or not it's true in

fact you should actively seek it out

volatility is great just imagine a a

completely Stable Market where there's

no stress everyone knows exactly how

much everything is worth and we all buy

and sell at the exact precise correct

value all the time sounds nice sounds

relaxing and it's the worst possible

place to book profits now if you've

already hit your lifetime wealth targets

congratulations of course but and your

goal is just now wealth preservation a

super stable environment might actually

work out just fine for you but if your

goal is to grow your wealth as I assume

the goal is for the majority of you

watching this video then volatility is

your friend and you should seek it out

you want to buy as low as possible and

sell as high as possible and volatility

helps that happen and for the widest

possible range you need big movements in

the market AKA lots of volatility now

after that absolutely probably want to

park those profits somewhere more

conservative high-risk altcoin money

into lowrisk stuff to conserve your

wealth but you need to make the gains

first man and on that note we should

really be glad to be trading when crypto

is an option because there's currently

no other Market quite like it in the

world no Market that's quite so insane

where the barriers to entry are so low

with the barriers to deploy new tokens

are so low the volatility is so high

meaning 10x or even 100x or higher

returns frequently occur to people like

you and where there is a constant

conveyor belt of just new tokens coming

by protocol vying for your attention so

while there are very very big risks and

you can lose all your money like that

never forget that okay but that

volatility is important and yeah it goes

both ways it goes up it goes down but

that volatility is the reason that we're

here it's what provides the big gains in

the market let me just remind you that

if you want to keep on top of everything

happening in the crypto space to find

those volatile opportunities my team and

I published the best Weekly Newsletter

in the business it's called wealth

Mastery and it is packed with all of the

latest on altcoins memecoins Bitcoin

defi nft charts and much more we are

working hard to help you stay ahead of

the curve of the market our readers love

it I know you will too you can join

125,000 plus weekly readers for free

using the link in the description or the

pin comment over onx now back to altcoin

volatility conversation the first key

factor making altcoin so volatile let's

discuss altcoin novelty you see if

you're immersed in crypto land as I am

and I suspect many of you will be then

you know bitcoin's the granddaddy the

Boomer coin such a new technology feels

funny to say it but it's true for crypto

the place where all roads lead is back

to bitcoin eventually BTC to you is

definitely not novel or in any way crazy

but remember that it's only really this

cycle with firms like Black Rock

launching Bitcoin ETFs that a majority

of Normie investors especially

institutional ones are really starting

finally to view BTC as legitimate asset

so from that traditional perspective if

BTC still seems kind of Novel to the

Normy investor than altcoins are truly

exotic crazy okay a whole heap of

unknowns are attached questionable

reputations are attached uncertainty

around what they actually do how does

this make money what is the token model

look bitcoin's just easy man just it's

digital gold there you go you understood

it all investors immediately have a

starting point to assess it from because

it's an easy concept to get but how many

altcoins come with a two-word easily

digestible summary like that none maybe

dog coins dog coin done anyway the more

novel a token is the more difficult it

might be to package it up into assess it

and there's some really crazy exotic

stuff out there and that puts alts at

the extreme end of risk on assets the

kind that can move up sharply in a bull

market and dump

instantaneously dramatically viciously

savagely when sentiment swings you'll

see your alt coins go down by 99% low

market caps low liquidity all that kind

of stuff other key issues you know

really important to keep in mind for

example Bitcoin has a market cap of

around $1.4 trillion the time recording

well by comparison chain link has a

market cap of around 10.5 billion very

important technology love my chain link

bags by the way from receive full

portfolio disclosures Link in the

description pin comom and and X further

down the rankings though and that chain

link is a big coin in the market it's a

top 20 coin further down we have stuff

like leading AI coin bit tensor which is

still in the top 50 it has a market cap

around $2.8 billion it's a baby a baby

okay remember all crypto combined is

worth less than Nvidia stocks anyway

that means for bit tensor for example

would take a lot less money coming in to

move the bit the bit tensor price and as

we move even further along the altcoin

curve the market cap gets smaller and

smaller and smaller at the really low

end we have Nano cap meme coins and

other tokens with market caps in singled

digit millions and even less than a

million sometimes and you can imagine

that in these cases even just one big

buyer or a small group of buyers jumping

in at the same time can easily shift the

price by multiple X's you'll see tokens

go hundreds or thousands of percent

almost overnight sometimes this is where

you get those crazy moves 10,000 x

happens it's crazy but it's true a great

example of course right now Salon meme

coin seen crazy things we had like the

book of meme ran up earlier this year

from literally nothing to market cap of

a billion dollars in like 3 days that's

Insanity now book of me could do that

because of course is launched by Niche

but well-respected nft artist who also

had a trusting community on his side so

all that obviously worked in his favor

and it still has a market cap of just

under a billion dollars so it actually

kind of maintained its success which is

pretty impressive for any meme coin

where was thousands of meme coins

launching a day but it's at this end of

the market that you also get pump and

dumps rug poles major price manipulation

and every kind of finance and gambling

related degeneracy that you can possibly

imag imagine it gets real dark real fast

also at these kinds of market caps if a

whale offloads a large bag after the

price Rockets up guess what they're

going to Nuke the chart they need

liquidity and that's you watch out

because at these levels liquidity to

sell it just just simply doesn't exist

it's not there that all said though

there are absolutely solid projects

emerging all the time from Nano caps and

low caps things with one5 1020 million

market caps

including memes of course that go on to

stick around and make a big impact dog

with hat great example they put the dog

on The Hat Man bleeding edge technology

it had a sub hundred million doll market

cap at the start of the year now it's

worth $3.5 billion that's a great

example of something that goes on to

make it but needle and Hast that kind of

stuff okay new AI coins like Palm

inspectre also look like they may have

more to come this cycle not Financial

advice just sharing some examples okay

but something you'll notice is that

coins that do well rely on a word we

hear all the time in crypto narrative so

stick around let's figure out exactly

how narrative affects volatility look

crypto narratives they are the stories

that are being told to make people want

to actually throw their hard-earned

money into these shall we call them

assets assets yeah this applies even a

Bitcoin at the top of the chain which

has the best narrative digital gold The

Narrative might be ETF approval might be

ETF institu buying those ETFs people

millionaires billionaires storing their

wealth inflation hedge all that kind of

stuff it's all narratives around Bitcoin

sometimes these narratives are for real

the ETFs did really get approved

institutions are actually buying Bitcoin

sometimes especially when it comes to

altcoins though the stories become less

solid and more prone to evaporate AKA a

lot more but people can buy

that narrative for the short

short term and all of course that means

volatility when a narrative is hot the

market believes in it even if it doesn't

make sense like metaverse in 2021

metaverse is going to take out years and

years to build Market priced it in as if

it was coming tomorrow when everyone

believes in it or collectively pretends

to believe in it prices can soar very

fast and these assets just go crazy but

just as quickly there might then be the

realization that actual development is a

long way off or a long shot to actually

work great idea probably not going to

work or hey great idea it's going to

take 5 or 10 years or attention simply

dissipates naturally because lots of

stuff happening in the market every day

Focus moves elsewhere new narrative

emerges New Meme coins come out whatever

it might be in the last cycle of course

we had strong narratives around ethereum

Killers for example all those

alternative layer ones that would

supposedly go on to outperform ethereum

take away all its market share ethereum

is the old dog new dogs going to come in

and kill it etc etc etc again we had the

metaverse narrative which was really

really bolstered like Facebook and stuff

like like that became a much more macro

narrative for the stock market and stuff

as well Zuckerberg even changed his

company's name to meta it was that

serious that serious right metaverse

still very exciting still going to be

cool but it's going to take a while in

this cycle of course we have narratives

around artificial intelligence real

world assets decentralized physical

infrastructure networks the mem coin

super cycle mem coins are the big

Narrative of this cycle by the way it's

not exactly clear what a mem coin super

cycle actually is it probably isn't a

real thing at all it's just some

phrase that people make up to

get you excited about buying me coins

but the phrase itself feeds into the

idea that Meme coins are going up this

is the time and people love mem coins

right now now just to reemphasize though

narratives can be based in reality or

they can be made up of absolute

but either way altcoins are especially

affected by those narratives and the

ability of people to convey those

narratives and believe those narratives

the bigger the volatility and response

to a matching narrative the bigger the

price moves and from there let's look at

a similarity between the stock market

and the crypto markets so let's talk

about beta to BTC so that's borrowing

some terminology from the stock market

here so we can make the general

observation that altcoins basically have

a high beta value in relation to bitcoin

as The Benchmark So In traditional

finance a high beta stock like a tech

stock for example of course they're very

much correlated to the broader Market

moves moving up and down risk on risk

off attitudes all that kind of stuff but

they move more violently so the S&P 500

might be the Benchmark and those beta

plays tech stocks in this example they

move much faster up and much faster down

they're high beta low beta stocks are

things like utilities boring boring

stocks and they're correlated but less

volatile than the Benchmark the S&P 500

for example now in crypto it's Bitcoin

that's the Benchmark altcoins that have

high beta you will really see this play

out

because they feed on rather than

generate bullish sentiment that's really

important to understand they feed on

rather than generate Bitcoin can set the

market off with wild bullishness that's

where the liquidity and flows start that

said though this isn't a nailed on

relationship all the time especially

when there are more new tokens being

created than ever before meme coins for

example have their own sort of Trends

but essentially you need to be more

picky now than ever before trying to

find the good quality altcoins react

most strongly to bullishness and a great

example of this cycle of course would be

Solana but that brings us to another

point which is that not all altcoins are

the same so how can you differentiate

how can you find the good ones let's

talk about categories of altcoin the

word altcoin is pretty damn broad so it

basically makes sense to split up into

subcategories and to start how about eth

is that even an altcoin anymore well

Bitcoin Max also say of course it's an

altcoin it's the ultimate shitcoin a lot

of other people people say no it's too

big to be classed as an altcoin it's its

own asset class now there are even spot

ethereum ETFs coming so of course it's

its own asset class it's not an altcoin

anymore so let's just say that if it's

an altcoin then it's in its own category

at least it isn't especially volatile

let's say that anyway after eth we have

the major alternative layer ones which

make up a lot of the top 20 things like

salana playing a huge role this cycle

coins like Avalanche cardano all that

kind of stuff usually in around the top

10 top 15 we've got newcomers like ton

chain absolutely surging and there are

many many others dozens hundreds

probably among these are the kinds of

coins that are very very volatile but on

extended cycle long time scales similar

position there's also the eth layer 2

scene that's going on with networks like

arbitrum and base but we also now have

exhaustingly to say layer 3es built on

top of layer 2os orbit chains and

arbitrum a chain called dgen on top of

Base I mean it's all so tiresome isn't

it then you've got utility projects so

there's things like oracles AI coins

real world asset coins decentralized

exchange tokens gaming tokens which can

vary a lot in market cap and a lot in

utility and many of them have extreme

swings on short time scales and after

that at the very most volatile on the

most risk-laden end of the scale of

course we have a

tsunami of Untold proportions of New

Meme coins being launched all the time

although don't forget that a few memes

can potentially go on to establish

themselves as really long-term assets

Dogecoin for example first mem coin the

OG meme coin launched way back in 2013

it is now a definitive piece of

furniture in cryptool it's part of the

landscape it's not going anywhere it is

the OG mcoin that made it finally though

what about Bitcoin by which I mean what

makes Bitcoin different and what can it

teach us Al about altcoin volatility

what it comes down to is a list of

characteristics Bitcoin was the first

that makes a difference same reason that

ethereum support is the first major

smart contract platform bitcoin's been

working perfectly as designed for a

decade and a half it wasn't pre-mined it

has two possible utilities store value

medium of exchange both very simple both

easy to understand its market cap has

grown into the trillions and it's going

to go on to add many many more trillions

to it it's listed on every major

centralized crypto exchange where

there's plenty of liquidity for it and

what's more of course is now being

accepted as a major traditional Finance

asset with ETF listings proliferating

around the world so it can be accessed

as part of a regular stock portfolio now

through these spot ETF products and so

actually that list of what makes Bitcoin

different on also gives you a pretty

clear idea of how much of a roller

coaster any given altcoin might actually

be low liquidity not listed on many

exchanges all kinds of crap like that

massive insiders Bitcoin checks all of

the good boxes so the further from those

same boxes a new coin is the more

volatility you can probably expect I

hope that helps explain why altcoins are

so volatile and also why that volatility

is actually a big POS positive for you

if you can play it right thanks for

watching