Bitcoin
Slippage in Cryptocurrency Speculation Index Suggests Bitcoin (BTC) Bull Market Reboot
Bull markets are often observed to stagnate during periods of excessive optimism, only to pick up again after the speculative froth dissipates.
Capriole Investments crypto speculation index shows that speculative excesses prevalent during Q1 has dissipated, indicating potential for further bullish bitcoin price action (BTC)the leading cryptocurrency by market value.
The speculation index, which measures the percentage of alternative cryptocurrencies (altcoins) with 90-day returns higher than bitcoin, has stabilized below 10%, significantly below its January high of nearly 60%. Bitcoin, the leading cryptocurrency by market share, hit new highs above $70,000 in the first quarter and has since cooled to $58,000.
At the time of writing, there are over 14,800 altcoins in existence, according to data source Coingecko. Most of these coins are illiquid and have difficulty proving their use cases. Therefore, altcoins are generally seen as speculative instruments, with volumes closely linked to Google Trends, an indicator of retail investor interest, and the outperformance of altcoins relative to BTC are seen as a sign of speculative mania.
Speculative washouts serve as corrective mechanisms, helping to realign asset prices with fundamentals and tempering excessive speculation. In doing so, they set the stage for a healthier environment in the long run.
This has been the case in the cryptocurrency market. Since 2019, a speculation index below 10% has coincided with the beginning of strong rallies in bitcoin, as seen in the first half of 2019, late 2020 and the second half of 2023.