- JPMorgan’s cryptocurrency expert said the surge in altcoins appears unsustainable and has echoes of the market crash in May.
- Nikolaos Panegirtzoglu wondered if the rise of coins like Ada Cardano was justified.
- Altcoins have risen sharply in recent weeks on hopes that they will be widely used in DeFi and NFTs.
A digital asset expert at JPMorgan said the recent rally in altcoins appears unsustainable and could lead to a cryptocurrency crash of the kind seen in May.
Ada, binance, solana, and other Cardano tokens have surged over the past few weeks as excitement builds over their potential use in decentralized finance (DeFi) and non-fungible tokens (NFTs). Most of the big cryptocurrencies remain sharply higher for the month, even after the cryptocurrency market experienced heavy selling on Tuesday and another volatility on Friday.
But the rally does not appear sustainable, as it is largely driven by unrealistic expectations about the tokens, according to Nikolaus Panegirzoglu, global market analyst at JPMorgan.
“There’s a big question mark here,” Banegirtugalo, a crypto expert at the bank, told Insider last week.
“Do the fuss with Cardano, Binance, Solana, [and other] Ethereum alternatives justified? Will there be enough traffic in these networks [and] Portfolio addresses, to justify this type of assessments? “
He said it looks as if the cryptocurrency market is in a “melting” phase, with investors rushing into assets that are rising in an attempt to reap some gains. He pointed out that such a stage often precedes a severe fall.
“I think we can repeat what we saw in May,” the strategist said. That month saw the collapse of the cryptocurrency market – including bitcoin and ether – after the price of cryptocurrencies such as Dogecoin and XRP soared.
Read more: Research Analyst at $2 Billion Crypto Company Explains The Bull Case For Polkadot Most Investors Ignore – And Shares Why Cardano’s Ada Looks Exaggerated After A Stellar Walk
Likewise, altcoins have risen sharply in recent weeks, with Solana up 318% in the 30 days to Friday morning, according to data site CoinGecko. Cardano’s crypto ada is up 29% over the same period, while XRP is up 23%.
Retail investors have been drawn to some network tokens that they expect will challenge Ethereum to widespread use in the fast-growing realms of DeFi and NFTs.
DeFi is the use of crypto technology to remove the need for intermediaries in financial contracts, and NFTs are a thriving asset class of crypto holdings and artwork.
Bobby Ong, co-founder and CEO of CoinGecko, told Insider that the excitement was “definitely exaggerated.”
He sees it as a typical crypto cycle: investors first accumulate bitcoin, then resort to highly volatile alternatives in search of more gains, before the crash causes people to leave the market and eventually start buying bitcoin again.
Panigirtzoglou said he saw some similarities with the crypto crash of 2018, which was also preceded by a rally in altcoins and ended with Bitcoin losing more than 80% of its value. However, he said, the cryptocurrency market is not likely to crash that hard again, because financial institutions and big companies like Tesla have bought into it.
However, there are opposing voices. Curtis Ting, managing director of Europe at crypto exchange Kraken, does not see the rise of altcoins as a red flag. He said the sharp sell-off in cryptocurrencies of the kind seen on Tuesday is “helping the market reset itself.”
“The increase in altcoins is helping to diversify the asset class and creating a feedback loop that could ultimately benefit the price of bitcoin,” he told Insider.