The lowest-level, highest-risk tokens are reportedly faring the worst in the recent crypto sell-off.
That’s according to a report Monday (Nov. 17) from Bloomberg News, citing the data from the MarketVector Digital Assets 100 Small-Cap Index. That index, which monitors the 50 smallest digital assets in a group of 100, dropped to its lowest level since 2020 on Sunday (Nov. 16).
As Bloomberg notes, this came as bitcoin, the most popular cryptocurrency, lost what had been a 30% gain for the year, weeks after reaching a record high. Altcoins, the report added, are viewed as a barometer for the riskiest speculative assets, and are badly trailing their more popular counterparts this year.
In the past five years, the small-cap index has fallen nearly 8%, while its large-cap counterpart has surged about 380%, with larger coins growing in popularity after the U.S. approved bitcoin exchange traded funds, the report said.
Retail traders are taking their cues from past cycles, Pratik Kala, portfolio manager at Australia-based hedge fund Apollo Crypto, told Bloomberg.
“A rising tide doesn’t lift all boats — it only lifts the quality ones,” he added.
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The crypto market was hit with a shockwave last month when a surprise U.S. tariff announcement led to a record $19 billion in liquidations and erased upwards of $1 trillion in market value across all tokens.
Since then, the report added, risk appetite has imploded, and traders are avoiding the most speculative assets.
Bitcoin had hit a record high of $125,000 in October before the sell-off began. Last week, it fell below $95,000 in response to concerns about heavy artificial intelligence (AI) spending, as investors in the crypto sector also tend to invest in Big Tech companies.
In other crypto news, PYMNTS wrote last week about a proposed crypto market structure draft bill introduced in the Senate recently.
“For industry players, market participants and observers, the implications of a crypto market framework could be profound,” that report said. “The regulatory limbo that has dogged crypto firms, stemming from unclear jurisdictional boundaries between the SEC and CFTC, would finally be addressed.”
However, the report added, the draft also points out some unresolved issues. For example, Section 208 on “Decentralized Finance” remains bracketed and marked “Seeking further feedback,” highlighting “that regulation of protocols, non-custodial actors, validators and open-network infrastructure is still in flux,” PYMNTS wrote.
Also yet to be finalized are the definitions of “blockchain,” “blockchain protocol,” “blockchain system,” and the criteria for “digital commodity.”
