JP Morgan analysts are warning of too much froth in the crypto market, singling out certain altcoins that are being bought up by retail investors. The analysts’ view is that this altcoin-led uptrend is not structurally healthy.
According to an article on Forbes this morning, a note was sent to clients of JP Morgan, the biggest bank in the US. Managing director Nikolaos Panigurtzoglou said that retail investors are buying up the price of altcoins such as Binance Coin, Cardano, and Solana.
This activity had provoked a huge surge in the price of these coins and had caused the altcoin dominance to reach 33% of the market, a very large rise from the 22% dominance altcoins had in early August.
Solana alone has recorded a simply huge 5000% since this time last year. Panigirtzoglou remarked that Bitcoin’s share of the market was “uncomfortably low” judging it from a historical perspective.
Panigirtzoglou said that NFTs, DeFi and smart contracts were a catalyst for the rise of altcoins that were related to these elements.
"The August rally in non-fungible tokens and the pickup in decentralized finance activity have helped not only ethereum but also alternative cryptocurrencies that facilitate or plan to facilitate smart contracts, such as solana, binance coin and cardano,"
"The previous phase of retail investors’ mania into cryptocurrency markets was between the beginning of January and mid-May... and retail investors are making cryptocurrency markets look frothy again."
Bitcoin recently saw a sell-off, taking the price back almost 20% from the new local high recorded on 7 Sept. The Bitcoin downturn took the altcoins down as well, although certain coins such as Solana held up extremely well.
The JP Morgan analysts concluded in the note to investors that:
"The share of altcoins looks rather elevated by historical standards and in our opinion it is more likely to be a reflection of froth and retail investor 'mania' rather than a reflection of a structural uptrend,"
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