Bitwise exec raises red flag on overvalued cryptocurrencies in the market

Matt Hougan, Bitwise’s CIO, cautions traders about highly valued crypto projects. He refers to the current state of the crypto market as the “wealth effect,” where Bitcoin owners diversify their investments into other cryptocurrencies, thus increasing their prices all around.

Altcoins outperform Bitcoin

Hougan pointed out on X that Bitcoin’s latest price jump has caused investors to invest in less reliable crypto tokens, possibly making them appear more credible than they are.

As per a Cointelegraph report, during the week leading up to March 7, altcoins performed better than Bitcoin, especially those themed around meme coins and AI.

Reiterating his stand, Hougan explained that investors’ sudden confidence surge was due to an increase in their Bitcoin investment.

Be careful out there. Lots of terrible projects get funded in exuberant bull markets and many are already trading at crazy valuations.

Matt Hougan

This newfound financial assurance prompted them to turn towards more speculative assets, hoping to reel higher returns. He pointed out that those well-versed in cryptocurrency make a significant profit in Bitcoin, feel wealthy, and subsequently search for more risky investments.

Bitcoin reached a new record-breaking high, hitting $70,184 on March 8. Around this time, Charles Edwards, the founder of Capriole Investments, a quantitative Bitcoin and digital asset firm, shared his belief that Bitcoin’s new peak value is fairly justified.

Moreover, Hougan questioned the prevalent hype, pointing out that Bitcoin has only expanded by “a few hundred percent from its lowest value.” He suggested that the fascination with altcoins isn’t necessarily based on Bitcoin’s percentage returns but on their overall market value.

2023 sees $1.8 billion lost to Web3 scams

The Bitwise executive also elaborated on how Bitcoin’s past price spikes generated less wealth on a dollar scale at that particular phase of the investment cycle despite the fact that they represented a significant increase in percentage terms.

With so many fraudulent activities in the crypto sector, a wary eye is cast towards unfamiliar crypto endeavors. On December 28, 2023, blockchain security service provider Immunefi revealed that $1.8 billion was lost to Web3 hackers and deceitful activities in 2023 alone.

With the rise of AI, it’s getting tougher for investors to decide if a project led by founders and developers is worth their investment. Jesse Leclere, a blockchain expert at CertiK, states that scams are evolving and getting more sophisticated. He urged users to stay extra alert for crafty manipulations.

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