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Meanwhile, XRP, the third largest cryptocurrency, jumped nearly 25%. Litecoin, Polkadot, Cardano, and Stellar, all of which are among the dozens of larger cryptocurrencies, also posted larger gains than bitcoin.
“Part of what happens is simple calculations. Small parts can have more [percentage] moves and there are a lot of other coins people can invest in, ”said Greg King, CEO of Osprey Funds, a company that invests in digital currencies.
To this end, bitcoin is significantly larger than other cryptocurrencies, often referred to as altcoins.
The current value of all bitcoin in circulation is around $ 360 billion. Ethereum’s value is just north of $ 70 billion, while XRP’s is around $ 30 billion. Litecoin, the fifth largest, is worth less than $ 6 billion.
“It makes sense for investors to have a portfolio with Bitcoin and Ethereum for the long term and have a basket of some of the others for trading,” King said.
Low rates and weaker dollar are bullish for all cryptocurrencies
But these smaller coins are to some extent riding the hype that took bitcoin to a new high. Bitcoin has benefited from a weaker dollar and expectations that a prolonged period of extremely low interest rates will eventually create inflation. This reinforces the appeal of a digital currency.
“The explosion of cryptocurrencies is a consequence of the economic environment,” said Michael Shaulov, CEO of Fireblocks, a digital asset security company.
Shaulov added that interest has exploded in so-called stablecoins like Tether and Paxos – cryptocurrencies backed by dollars, euros and other government currencies.
Investors may be drawn to other cryptocurrencies as well, as they fear bitcoin will become too popular a dynamic trade.
“The one thing I think you’ll see more and more … is that people understand that when you only invest in one asset, you have concentration risk,” said Brad Garlinghouse, CEO from Ripple, the company that helped launch XRP, in an interview with CNN’s Julia Chatterley on Wednesday.
“Diversification is important. Diversification reduces risk,” Garlinghouse added.
Bet beyond bitcoin
Other experts agree that investors cannot bet on Bitcoin alone.
“I can see a scenario where ethereum can potentially outperform bitcoin over the next year. XRP has also finally broken its downtrend,” said Rachid Ajaja, CEO and founder of AllianceBlock, in an email to CNN Business.
While many cryptocurrencies have done well lately, several of them are still well below their peaks – unlike bitcoin. They may therefore have more leeway to catch up.
Nicholas Pelecanos, head of trading at blockchain company NEM, noted the example of Ethereum now trading around $ 615, more than 50% below its all-time high of over $ 1,400 since early 2018.
“There has been more demand from major money managers for cryptocurrencies, and the big question is, what is the relative value of these altcoins versus bitcoin,” he said. “There are probably more advantages in Ethereum than Bitcoin.”
Guy Hirsch, managing director for the United States at eToro, a brokerage and trading company, added that there has been more interest lately in ethereum and XRP as they have gained “more recognition and credibility”.
Some of the even smaller cryptocurrencies can rally even more. Digital tokens like VeChain, Terra and Compound have each jumped over 25% over the past week.
“All big altcoins started out as small coins,” Don Guo, CEO of Broctagon Fintech Group, said in an email to CNN Business. “While the crypto market is on an uptrend, we notice that many smaller investors are actually considering investing in smaller coins to hopefully hit the jackpot.”
“The cryptocurrency market is not limited to bitcoin, just as there is more to the equity market than Apple,” said Denis Vinokourov, head of research at leading digital asset broker Bequant.
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