Originally published on: December 04, 2024
In the past 30 days, altcoins like Hedera (HBAR), Stellar (XLM), XRP, and Algorand (ALGO) have experienced a staggering surge of over 250%. This rapid rise has left investors wondering whether this bullish trend is sustainable or if a correction is on the horizon.
Some believe that these altcoins were undervalued compared to their previous all-time highs, indicating potential for further growth. However, the heavy use of leverage by traders is raising concerns about the risk of sharp price corrections.
According to CoinGlass data, the 30-day funding rate for perpetual futures has hit a 9-month high, with bulls shelling out 4% to 6% per month to maintain leveraged positions. While these costs may not seem significant during upward trends, they can quickly eat into profits if prices stagnate or decline.
Historically, altcoins have seen funding rates spike during bullish periods, only to be followed by price corrections. This pattern suggests that while funding rates may indicate market sentiment, they are not the sole factor determining the future of these altcoins.
Interestingly, major cryptocurrencies like Bitcoin and Ethereum are exhibiting lower funding rates despite their substantial price gains. This discrepancy highlights the unique dynamics of the current altcoin season and the role of leverage in driving these markets.
The recent surge in altcoin funding rates, coupled with the speculative frenzy around meme coins like Goatseus Maximus and NEIRO, indicates a mix of optimism and caution in the market. While these valuations may be inflated, only time will tell whether they are sustainable in the long run.
Despite the increase in funding rates, the risk of cascading liquidations in most altcoins remains low for now. However, elevated leverage levels suggest that caution is warranted as volatility continues to define the crypto landscape.
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