Matt Hougan, Investment Director at Bitwise, pointed out that the growth of Bitcoin and altcoins is due to the influx of new funds into the crypto sphere through ETFs.

“We see a lot of discussions about the start of the altcoin season. For some, this may be surprising, considering that Bitcoin is only a few hundred percent above the minimum. The main driver of the altseason is the classic ‘wealth effect’,”
– he explained.

Hougan noted that a similar dynamic is observed in the traditional economy, where people, earning money from large companies, then seek small firms for venture investments.

“They also often visit Vegas. Market rotation and ‘wealth effects’ – a story familiar to everyone. The altseason is catalyzed not so much by Bitcoin’s yield as by the overall ‘wealth effect’. Since early November 2022, Bitcoin’s capitalization has grown by $1 trillion – these are huge sums,”
– Hougan added.

This means that wealthy crypto investors are moving their funds earned in Bitcoin to other digital assets. Many altcoins are relatively small, so they don’t require a lot of funds to grow.

“An additional and more exciting catalyst has been a significant improvement in technological infrastructure for altcoins in previous cycles. The Dencun upgrade in Ethereum and the development of second-layer solutions are real technological achievements,”
emphasized Bitwise’s CIO.

Hougan explained that the current bull market is different from previous ones, as the 2024 rally is driven by external funds entering the ecosystem through ETFs.

According to him, this trend will continue as long as more funds flow from ETFs to Bitcoin than flow from Bitcoin to other cryptocurrencies. This will result in “all-seasonality” instead of the classic altcoin season.

“In conclusion: be cautious. Many unsuccessful projects are funded in bull markets, and many of them are already overvalued. Of course, there are excellent projects too, but not everything that grows deserves attention,”
– the expert warned.