For those who haven't been paying attention, cryptocurrencies are broadly ripping higher. A culmination of factors, including ramped-up bets that the Federal Reserve has completed its hiking cycle and some stabilization in the U.S. dollar, are driving bond yields lower and spurring newfound interest in alternative risk assets.
Moving out on the risk curve, investors looking to add risk (and return potential) to their portfolios appear to be targeting key cryptocurrencies to play this momentum.
Among the three most in-demand cryptos over this past week have been Avalanche (AVAX 3.72%), Cardano (ADA 2.04%) and Shiba Inu (SHIB 2.65%). As of 2 p.m. ET, these three tokens have skyrocketed 31.8%, 39.4% and 20.4%, respectively, since 4 p.m. ET last Friday.
Let's dive into what's driving this move for these three megacap digital assets.
What's behind this recent impressive surge?
Moves of 20% to 40% in any asset are going to raise eyebrows. Indeed, the broad-based rally we've seen in recent weeks in the crypto sector has certainly reignited the kind of interest many thought was lost following last year's rabid market decline.
Avalanche has seen a surge in interest as a key Layer-1 network, viewed largely as a faster and lower-cost option relative to the industry leader, Ethereum (ETH 2.23%). Having seen a peak-to-trough decline of well more than 90% this year, Avalanche has rallied more than 230% in the span of a little more than five weeks, putting the token once again in the top 10 category of cryptocurrencies by market capitalization.
Investors looking to ride the momentum seen in Bitcoin (BTC 1.04%) and Ethereum appear to be looking to alternative networks with higher growth rates and greater exposure to the broader industry trends. Right now, deep value investors and speculators alike appear to be targeting Avalanche as a crypto with significant upside potential.
Cardano has received a shot in the arm due to a unique catalyst -- one investors appear to be paying close attention to. Stock and crypto trading platform Robinhood recently launched crypto trading in the European Union, tapping Cardano to be among the first cryptos listed on the platform. This move is important, in the sense that Robinhood had previously delisted this token on its U.S. exchange. Thus, for investors who are betting on crypto as a global asset class and view the more robust E.U. regulations as supportive of an eventual relisting in the U.S., this move could spark continued intrigue in beaten-down Cardano.
Finally, Shiba Inu's impressive rise is one that investors are focusing on for a variety of reasons. From a technical perspective, the token's recent elimination of a zero (with Shiba Inu surpassing the $0.00001 level) has provided traders and momentum investors with reason to be excited. During previous rallies, any time a zero has been eliminated, a surge in investor interest has led to short-term spikes. While not a fundamental driver, and certainly one that many long-term investors will rely on, it's clear Shiba Inu is among the meme tokens with plenty of momentum right now.
Can these crypto market moves be sustained?
The crypto market clearly has a tremendous amount of momentum right now, and we're seeing a big influx of capital into the sector we haven't seen in some time. Of course, this high-risk, high-upside asset class carries a tremendous amount of risk, and we've seen what a risk-off bearish environment can mean for these assets (evidenced by 2022's impressive declines).
Avalanche and Cardano benefit from their infrastructure. As decentralized proof-of-stake Layer-1 networks, demand may remain high for these tokens in a bullish environment, as investors look to find the next big winner in this space.
However, we've seen periods of time when investors look to hunker down in the more stable and established Layer-1 platforms, and that's been Ethereum for some time. Thus, investors are betting on a continued surge of capital into alternative networks --something that's uncertain. And while Shiba Inu's recent price momentum may spur further interest in this token, it's also true that a relative lack of utility could hamper activity on the network, suggesting this recent move is more hype-related than tied to any sort of fundamentals.
For these reasons, I think investors need to take a cautious approach to these high-flying cryptos. This move is great for existing investors. But for those looking to put capital to work, it's important to assess the fundamentals of each project.
