Altcoins Outperform Bitcoin and Ether After Fed Rate Cut

Altcoins outperformed Bitcoin and Ether after the Federal Reserve announced a rate cut on Wednesday. Since the announcement, cryptocurrencies other than Ether and Bitcoin have risen 5.7 per cent, while Bitcoin is up just 4.4 per cent.

Bob Wallden, head of trading at investment firm Abra, said the difference is not unusual because Altcoins are less liquid and more volatile, and the Total3 Index shows that the market capitalisation of the top 125 cryptocurrencies has risen by 5.68 per cent, while Bitcoin's has risen by just 4.4 per cent.

Wallden explains that Altcoins are similar to tech stocks that outperform the SP 500 when the market picks up, and that their low liquidity leads to higher volatility, especially when there is plenty of liquidity.

Bohan Jiang, head of OTC options trading at Abra, adds that the illiquidity of Altcoins makes them more visible when risky assets perform well. The accumulation of short positions over the past few months may also have caused Altcoins to show a rise similar to a short squeeze.

The Fed's decision to cut interest rates pushed Bitcoin prices above $64,000 on Thursday, the highest price since 26 August. The price then retreated and is currently trading at $62,898.

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