Originally published on: December 04, 2024
The world of altcoins is buzzing as select cryptocurrencies like Hedera (HBAR), Stellar (XLM), XRP, Algorand (ALGO), and Cardano (ADA) have witnessed impressive gains of over 250% in the last month. However, investors are split on whether this rally is sustainable or if a correction is looming on the horizon.
While some argue that these altcoins were undervalued compared to their previous all-time highs, others are wary of the heavy use of leverage among buyers, which could lead to sharp price corrections. The 30-day funding rate for perpetual futures has surged, reaching as high as 6%, indicating a potential risk for traders as they maintain leveraged positions.
Data from CoinGlass shows that while current funding rates for ADA and XRP are higher compared to the past six months, they are still below their 12-month highs. This suggests that altcoins may still have room for growth, driven by leverage. However, funding rates alone cannot guarantee the continuation of this bull run.
It’s essential to note that previous altcoin rallies were followed by funding rate increases, leading to price corrections. Compared to major cryptocurrencies like Bitcoin and Ether, altcoins are experiencing higher leverage, with funding rates of 4% to 6%. While this remains manageable for now, caution is advised as volatility persists.
The recent surge in altcoin funding rates reflects the speculative frenzy in the market, with meme coins like Goatseus Maximus (GOAT), NEIRO, and Cat in a Dog’s World (MEW) reaching astonishing market capitalizations. This frenzy has elevated the perceived value of altcoin projects, but whether these valuations are justified or fleeting remains to be seen.
In conclusion, while altcoins are riding high on leverage-driven growth, investors should approach the market with caution. As the altcoin season unfolds, keeping an eye on funding rates and leverage levels will be crucial to navigating the volatile landscape of cryptocurrencies. Stay informed and make strategic decisions to capitalize on investment opportunities while mitigating risks.