With the crypto market rally, altcoins have benefited just as much as bitcoin. Digital assets across the space have been able to return to their pre-FTX crash levels, signaling the start of a bull run. However, as the market begins to settle into this new normal, investors are shifting gains from larger-cap assets to take advantage of potential price movement in smaller altcoins.
Cycling money to small-cap altcoins
A recent report from the on-chain data aggregation website Santiment shows that investors may be pulling money out of larger-cap coins like Cardano and Solana and moving into small-cap coins. This paints a picture of a fund rotation rather than taking money directly from the crypto sector.
Santiment notes that the big gains posted by companies like Solana, Cardano, and Polkadot are now being passed down to smaller altcoins. Most of these coins are top 200 and below tokens with market caps below $300 million.
The fund cycle in these smaller altcoins is shown by their direction activity. The image shared by Santiment shows a significant uptick in management activities for these coins. In particular, the rally was seen from last week, as many of these larger-cap coins hit new local highs.
Money flows out from large cap to small cap altcoins | Source: Santiment
The small-cap coins mentioned in the report are TRADE, RBN, SLP, PLSPAD, POND, MITX, MTH, and CBG. Most of these are under the radar coins. Ribbon Finance (RBN), which is the top performer on the list, has only a market capitalization of $139.7 million, but is up 24% in the past seven days.
What happens to these tokens?
The tokens mentioned by Santiment are still small enough that they could see a prominent move with only a fraction of the amount needed to move the SOL and ADA prices. This means that if this rotation of earnings from large-cap to small-cap altcoins continues, these tokens could see positive movement in the coming days.
However, for coins with such low market capitalizations, just as it is easy to push their prices up, it is also easy to drag their prices down with selloffs from some big holders. It becomes a double-edged sword for investors following the move. On the one hand, it could mean very large profits in a short time, but on the other hand, you could see them lose money quickly.
However, the good thing about this is that the attention is spreading instead of just focusing on a handful of coins. As wallet activity for these altcoins increases, it could trigger exploration of similarly priced altcoins that could benefit from new interest.
Crypto market cap crosses $1 trillion as investors move money around | Source: Crypto Total Market Cap on TradingView.com
