Bullet Points:
• Altcoins are showing signs of potential recovery following a 90% drawdown in most assets.
• Many top altcoins have posted returns reminiscent of the previous bull market.
• This recovery could be due to a calendar-based phenomenon called the January effect.
As the crypto market slowly begins to show signs of life, the altcoins have come out of their slumber and have started to recover from their 90% drawdown in most assets over the past few months. It’s been a long and painful bear market, but the bulls have finally awoken and the altcoins are leading the charge.
The top altcoins of the market are starting to post returns reminiscent of the previous bull run. GALA has posted the largest weekly return with 138%, while Lido DAO is not far behind with 61%. Dozens of other altcoins have posted gains of 20% or more in the same time period. Even coins caught up in the FTX-related fallout, such as Solana, have posted their largest monthly bullish candle since August 2021.
This recovery in altcoins could be attributed to a calendar-based phenomenon known as the January effect. This phenomenon occurs in the month of January, and is just one of many calendar effects in financial markets, such as the “sell in May and go away,” the Halloween effect, the July effect, and the Santa Claus rally.
The January effect is essentially a claim that prices in the stock market tend to increase in the month of January. This is due to the fact that investors tend to invest their money back into the markets after taking profits off the table in the previous year. This influx of capital could explain the recent rally in the altcoins, as investors are looking to capitalize on the potential recovery of the crypto markets.
It remains to be seen whether or not the altcoins will be able to sustain their current rally or if this is just another false hope in a long and drawn-out bear market. However, with the signs of a potential recovery in the air, the altcoins are certainly looking primed to capitalize on the January effect and continue to surge in the days and weeks ahead.