The past two years have been challenging for the cryptocurrency market. From its peak in 2021, it had a steep crash only a year later as inflation set a new all-time high. Nonetheless, cryptocurrencies appeared to become more predictable, which could drive their price increase.
As the market heats up, we see prices bouncing back and approaching their 2021 highs. Bitcoin (BTC-USD) and Ethereum (ETH) continue to lead the market with their price and volume. However, other investors are looking at cheaper Altcoins while testing the waters.
Binance (BNB-USD)
Current Value: $318.96
Market Capitalization: $47.7B
Binance (BNB-USD) is a utility token often used to pay trading transactions and avail of discounted trades on its crypto exchange platform, Binance Exchange. You can use Binance tokens outside Binance Exchange, so you have more freedom to choose whatever platform you want.
Even better, its coverage has already expanded in recent years. It now allows users to pay for other services, like booking travel arrangements.
The only downside is that Binance is less decentralized than other cryptocurrencies. In addition, its former CEO Zhang stepped down and pleaded guilty to an Anti-Money Laundering Act violation. This affected its credibility, as its value dropped 8% a few hours after the report.
On a lighter note, Binance is a solid coin backed by the largest cryptocurrency exchange in the world. Most importantly, Binance is highly liquid with prudent financial positioning. Its token reserves are high and well-diversified, with Bitcoin (BTC) comprising 30% of the total. With that, it does not solely rely on its tokens, which are only 5% of the total reserves.
It also has $79.32B in assets to cover the $4B fine in a single payment, even if it does not have to. Hence, Binance is far from another FTX (FTT-USD) in the making.
TRON (TRX-USD)
Current Value: $0.110833
Market Capitalization: $9.8B
Tron (TRX-USD) started to circulate in Singapore in 2017. Since then, it has expanded to other regions, allowing it to go head-to-head with larger Altcoins. Originally, it was intended to be a decentralized blockchain. But at the end of 2021, it was already a decentralized autonomous organization (DAO).
Today, it is valued at $0.1108, a 4,432% increase or 44.32 times its original launch value of $0.0025. Furthermore, we can see a sharp difference from $0.08 in mid-2023 to its current price. There are 88.20B TRX circulating in the market, equivalent to a market capitalization of 9.8B. As such, Tron is now one of the fastest-growing cryptocurrencies.
Dogecoin (DOGE-USD)
Current Value: $0.087389
Market Capitalization: $12.4B
Dogecoin (DOGE-USD) began as a meme or joke in 2013, making it the original meme token in the market. With a dedicated community that has kept creating insightful memes, it has quickly evolved into one of the most in-demand cryptocurrencies today.
But critics still point out its risks compared to Bitcoin despite having some big backers. Its fluctuations can come from extreme lows to extreme highs and vice versa, depending on market volatility. This may be acceptable since DOGE has yet to provide real-world use scenarios.
Why Invest in Three Three Cheaper Altcoins
Ethereum remains the second-largest cryptocurrency and the leading Altcoin. It keeps expanding to other niches, allowing it to offer different solutions, such as Ethereum contracts and a credit monitoring service. However, some investors are apprehensive about its price and thus looking for much cheaper alternatives. Besides their low price, these aspects show why they are wise choices.
Altcoins appear to be more predictable today
Crypto traders have always thought market sentiments solely drove them. But in the past two years, their inverse correlation has surfaced and has become evident.
Their sideways movement in the second half of 2022 amid inflation decrease and interest rate hikes further proved our supposition. But it was in 2023 when their correlation became more reasonable.
Prices rebounded when inflation decelerated further, and rate hikes were paused. In the third quarter of 2023, prices decreased again when inflation regained momentum. However, since the fourth quarter of last year, the uptrend resumed when inflation decreased again.
With that, cryptocurrencies may not be a good inflation hedge. Nonetheless, this inverse correlation shows that price swings can become more predictable with inflation. Also, market sentiments can become manageable, lowering risks and volatility.
And now, inflation is at 3.4%, but the holiday spending splurge mainly drove it. As consumption normalizes, inflation may relax again in the succeeding months. Even better, the Fed targets to pause rate hikes again before cutting interest rates later this year.
These will add upward pressure on crypto prices. We are seeing this now since the market is starting to heat up. Hence, there is still solid upside potential now.
High returns
Ethereum is showing attractive upside potential. Yet, it has recently underperformed relative to the market. It is more evident if we compare it to other Altcoins. With the Sharpe Ratio, we can see how their returns have fared with volatility over the years.
Ethereum (ETH) |
Binance (BNB) |
Tron (TRX) |
Dogecoin (DOGE) |
Average |
|
Average Annual Returns |
47.00% |
103.97% |
58.40% |
83.49% |
72.99% |
Risk-Free Rate |
3.99% |
3.99% |
3.99% |
3.99% |
3.99% |
Standard Deviation |
88.48% |
174.34% |
104.92% |
113.66% |
120.33% |
Sharpe Ratio |
0.49 |
0.57 |
0.52 |
0.70 |
0.57 |
Ranking |
4 |
2 |
3 |
1 |
Clearly, ETH has underperformed relative to the market, although it has the smallest volatility. Binance appears to be the riskiest, but its high returns of almost 104% make up for its high volatility.
On the other hand, Dogecoin has the best risk-reward management. Its average annual returns and standard deviation are high and relatively manageable, making it the optimal choice. Moreover, the Sharpe Ratio of the three proves investors can pick them instead of Ethereum.
Conclusion
The cryptocurrency market is showing enticing growth prospects as it heats up. Bitcoin and Ethereum remain the top picks among the investors. But there are great alternatives to consider. They may offer high returns at a reasonable volatility.
Investors exploring the cryptocurrency landscape can find great alternatives that diversify their portfolios. These alternatives often bring unique features, innovative technologies, and distinct use cases.
This news is republished from another source. You can check the original article here