Data Shows the 'Cheaper Altcoins Make Higher Returns' Myth Is Flawed

gepubliceerd op by Cointele | gepubliceerd op

For many investors crypto trading remains a rags-to-riches affair where inexperienced investors hope to strike it rich by buying the cheapest priced altcoins like many novice traders did in 2017.Currently, the majority of traders do not expect Bitcoin to pump 50% or more in a single week as $18,400 seems rather infeasible.

On the other hand, many of these same investors are willing to put their hard-earned funds behind a lower cap, cheaper altcoins with the hopes that buying cheaper cryptocurrencies will lead to a higher return.

As previous years have shown, altcoins can gain relevance even when cryptocurrency markets remain reasonably stable by increasing their market share.

The above chart shows four recent occasions when altcoins gained ground against Bitcoin's market capitalization.

If the myth of the low-priced coins having a higher potential holds, one should see those outperforming the remaining altcoins during each of these altseasons.

The beginning of February was no different, and altcoins continued to rally until Bitcoin peaked near the $10,400 level.

26 of the 38 cryptocurrencies priced below $3 among the top 60 managed to outperform the 35.2% increase in altcoins market capitalization.

Altcoins were already moving strongly alongside the broader market and they pushed even further over the next week.

Buying the cheapest coins theory fails to hold upOver the past four periods of altcoins surges against Bitcoin's price, the three cheapest coins managed to outperform in only one case.

Although it is possible to find strategies to optimize returns using cheap altcoins during altcoin seasons, this arbitrary indicator alone does not produce higher returns than the broader altcoin market.