The crypto market continued its hot streak late on Friday and into Saturday, this time led by altcoins focused on speed and utility to gain adoption. Bitcoin and Ethereum have gotten much attention lately, but many altcoins have gained more in value.
Mid-day on Saturday, Algorand (ALGO -1.59%) is up 10.3% in the last 24 hours, Fantom (FTM -1.39%) is up 11.5%, Avalanche (AVAX -2.04%) rose 13.4%, and Polkadot (DOT -1.37%) is up 6.8%. As always, there's been a lot of volatility, but the moves appear to be holding as weekend volume slows down.
The crypto bounce continues
Altcoins are leading the crypto market recovery, and various tokens have jumped in just the last few months. There's some more bullishness from the market tied to falling interest rates, rising growth stocks that correlate to crypto, and a steady march to more regulatory clarity.
On a development front, Deloitte announced it is working on the KILT Protocol on the Polkadot blockchain to build a "Know Your Client" and "Know Your Cargo" system for the shipping industry. This will allow clients to identify and verify clients' shipped goods.
Development like this is increasingly taking place on either Layer 2 blockchains (built on top of a Layer 1, like Ethereum) or blockchains built specifically for speed and efficiency. That's what all four of these tokens have going for them.
A broad tailwind for cryptocurrencies is the improving regulatory environment. In the U.S., the Securities and Exchange Commission continues to lose court cases, and Congress can't seem to pass a law to either ban or legalize cryptocurrencies. In countries like Singapore, Venezuela, and the U.K., there are new or pending laws allowing more cryptocurrencies to be used as forms of payment. This will also help the development of blockchain applications in these locations.
Risk is paying off in crypto right now
Cryptocurrencies are a very high-risk asset class, and that risk is paying off for now. A flow of money into the industry has driven values higher after many investors left the industry altogether in 2022.
As bullish as I am on the future of the blockchain, I do think the rise in many of these tokens will ultimately end poorly for investors. If there's no utility on the blockchain or use for the token itself, the value is only in the trading asset. And we saw in the crypto winter that, eventually, these tokens can drop.
Investors should look for where the most activity is taking place and what kind of activity is happening. For example, the shipping development I mentioned above won't actually use the Polkadot token, so it won't drive much value to the token even if the blockchain is being used. The same goes for stablecoins, which can be used to pay for transactions but don't necessarily help the underlying token's value.
While it's good to see altcoin values rise if you're holding them, remember the risk involved in the industry and how the market can turn south because it can happen quickly.
