Wall Street giant JPMorgan, which has correctly called at least one cryptocurrency market sell-off already this year, has warned over “froth and retail investor mania” currently coursing through the crypto market—singling out ethereum rivals solana, Binance’s BNB and cardano.
The price of solana, cardano and Binance’s BNB have increased at an eye-watering clip over recent months, with solana’s sol token charging into the crypto market top ten and hot on the heels of both BNB and cardano. Solana, up a further 30% on this time yesterday, has added a whopping 5,000% since this time last year.
In a note to clients, JPMorgan managing director Nikolaos Panigirtzoglou said retail investors have been propelling smaller cryptocurrencies to never-before-seen highs, with bitcoin’s share of the market now looking “uncomfortably low” by historical standards.
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“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,” Panigirtzoglou wrote, pointing to data that showed so-called altcoin trading now represents about 33% of the cryptocurrency market, a significant uptick from 22% in early August.
“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.”
This week, crypto prices have swung wildly as El Salvador’s plan to adopt bitcoin as its official currency alongside the U.S. dollar gets off the ground—sparking a huge amount of media attention.
On Tuesday, the bitcoin price saw a near-20% sell-off sending shockwaves through the crypto market and knocking the price of ethereum and its rivals solana, Binance’s BNB and cardano. Most major cryptocurrencies have now bounced back, however.
“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,” JPMorgan analysts concluded.
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After solana has dominated the altcoin market over the last week or so, cardano is thought likely to return to form over the next week or so as expectations build ahead of a planned upgrade this weekend.
“The altcoin space has only been heading in one direction with ADA as one of the best-performing assets,” Lukas Enzersdorfer-Konrad, chief product officer at crypto exchange Bitpanda, said in emailed comments. “Cardano’s alonzo upgrade and the arrival of smart contracts on the network is right around the corner which is driving the price higher.”
“Cardano is now the world’s third-largest crypto behind ‘scene stealers’ bitcoin and ethereum,” Nigel Green, the chief executive of financial advisory group deVere, said in emailed comments, pointing to cardano’s 1,668% price rally since January.
“This impressive momentum is set to gain further pace as we move towards the end of the year. I believe we can expect cardano to hit fresh all-time highs, reaching more than $4 by the end of 2021.”