Bitcoin (BTC-USD) reached the milestone of $100,000 for the first time on Wednesday night, sparking a rally across the entire cryptocurrency market. This historic increase not only boosted Bitcoin’s value but also propelled smaller cryptocurrencies to even more impressive gains, signaling a shift in market dynamics.
The recent surge in Bitcoin followed the appointment of Paul Atkins as chairman of the Securities and Exchange Commission (SEC) by President-elect Donald Trump. Atkins, a well-known advocate for cryptocurrencies, is regarded as a positive choice for the role, fueling optimism among investors. His appointment is expected to pave the way for a more crypto-friendly regulatory environment in the U.S., potentially further supporting the market.
Since the election, Bitcoin, the world’s largest and most recognized cryptocurrency, has risen by over 40%, hitting the symbolic $100,000 mark. However, the real story lies in the performance of smaller cryptocurrencies, which have experienced even more dramatic increases. Ethereum (ETH-USD), the second-largest cryptocurrency by market cap, has surged nearly 60% since the election. Meanwhile, smaller coins like Ripple (XRP-USD), Cardano (ADA-USD), and Dogecoin (DOGE-USD) have witnessed triple-digit rallies, outpacing Bitcoin with sharper gains.
Several factors explain this phenomenon. According to Andrew Baehr, Head of Product at CoinDesk Indices, the larger movements in smaller cryptocurrencies can be attributed to the fact that they face more regulatory hurdles compared to Bitcoin, which already benefits from exchange-traded funds (ETFs) linked to it. Bitcoin’s position as the largest cryptocurrency has granted it more legitimacy and acceptance in traditional markets. However, smaller coins like Ethereum and others still face significant regulatory challenges, leading to higher volatility and, consequently, greater growth potential as they overcome these barriers.
“The other assets depend more on regulatory groundwork,” Baehr explained. “Consider emerging innovations like smart contracts, stablecoins, decentralized finance (DeFi), and Web3—all advancements poised to reshape our lives in the coming years. For these technologies to thrive and evolve, they require strong regulatory support to gain trust and security.”
Baehr also pointed out that the rapid growth of smaller cryptocurrencies could indicate that these assets are advancing more aggressively, driven by the need to overcome stricter regulatory obstacles. As a result, these smaller coins present high potential for valuation growth in the near future.
However, Baehr cautioned that for mainstream investors seeking straightforward exposure to cryptocurrencies within their diversified portfolios, jumping into the rally of smaller coins may not always be the best approach. Smaller cryptocurrencies are often more volatile and riskier, offering the chance for quick gains but also the possibility of significant losses.
“To track smaller coins, you really need to dive into the details and understand the underlying projects,” Baehr said. “Timing the market is nearly impossible. Cryptocurrencies are inherently volatile, and predicting when and how they will move can be incredibly challenging, even for the most experienced investors.”
In this context, many conservative investors may prefer to stick with more established cryptocurrencies like Bitcoin or Ethereum, while those willing to take on greater risks might look for opportunities in smaller coins that are still developing in terms of regulatory approval and broader market acceptance.”
