Crypto Altcoins Are Rekt - Here's Why
Summary
TLDRThe 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
🚀 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.
📊 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.
🌐 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.
🏦 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.
Mindmap
Keywords
💡Volatility
💡Altcoin
💡Risk Management
💡Bitcoin (BTC)
💡Market Cap
💡Novelty
💡Narrative
💡Beta to BTC
💡Meme Coins
💡Utility Projects
💡Liquidity
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
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