Down Arrow Button Icon

It’s felt like old times in the crypto markets as traders celebrated the first proper “Uptober” (October in crypto speak) in a while, with Bitcoin gaining around 28% by month’s end. Meanwhile, the start of November has seen altcoins get a piece of the action with XRP rising around 20% over the past week as Dogecoin and Cardano have likewise posted double digit gains.

All of this reflects the return of what market watchers like to call “risk on” behavior—or what skeptics might prefer to call “Let’s hit the casino, boys!” The basic idea is that, as the vibe around crypto improves, more traders are willing to seek out investments that offer high risk but the potential for high rewards.

As analyst Noelle Acheson has noted, the recent rally has been fueled by the return of leverage as more traders borrow money to supersize their bet on a variety of exotic tokens. Meanwhile, the crypto derivatives market is humming again as people are buying stablecoins from DeFi platforms to try their luck on perpetual futures contracts and similar bets that those of us without a Ph.D. in math would be crazy to go near.

The question is what this all means. As is the case with most crypto market price swings, there appears to be no single cause to explain the current rally. Instead, there is a series of potential factors driving the current mini-boom—including a growing consensus that Crypto Winter is over at last and that better times are on the way. Don’t underestimate how much sentiment, bad or good, drives the market—and especially the crypto markets.

If the current altcoin rally lasts, though, the thing I am most curious to see is if traders put a new premium on fundamentals—however you want to define that term when it comes to crypto. In past bull markets, few investors bothered to look for anything resembling empirical evidence to justify throwing their money at the fly-by-night coin du jour. Instead, they relied on half-baked advice from their taxi driver or personal trainer, or accepted the claims of bag holders and bot armies on X. Number go up and all that.

This time around, it would be nice to see crypto traders return to the market older and wiser after the many debacles of the last cycle. And just maybe the price of altcoins will rise because they have found a novel application or because a critical mass of people are using them for something beyond blind speculation. That’s the optimistic case. But if this new cycle proves to be driven again by mindless gambling, we can look forward to the same bad hangover that’s become a defining feature of the crypto industry.

Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts

DECENTRALIZED NEWS

Kraken plans to follow Coinbase's lead and launch its own layer-2 blockchain, possibly built on the tech stack of Polygon or Matter Labs. (CoinDesk)

Visitors to Hong Kong's version of the NFT festival ApeFest, hosted by Yuga Labs, reported burning eyes as a result of exposure to ultraviolet light. (Bloomberg)

NFT collections based on The Simpsons soared in value after the famous TV show's latest episode mocked NFTs. (Decrypt)

U.K. regulators, citing the potential for savings and easier international payments, proposed plans to bring stablecoins into the day-to-day economy under the supervision of the Bank of England. (FT)

An inspector general's report found the SEC is struggling to recruit crypto experts partly due to agency rules that restrict crypto ownership. (Fortune)