Bitwise CIO: Silver’s Surge Mirrors Altcoin Boom Patterns

According to Bitwise CIO Matt Hougan, the current precious metals rally is a ‘classic altcoin cycle in metals.’ The mechanism driving it is the wealth effect, a behavioral economics principle where investors feel wealthier after significant gains and seek to deploy those profits into new opportunities. This dynamic is vividly illustrated by gold’s performance: with an estimated market cap of $34 trillion, its price has surged 80% over the past year, creating monumental wealth as it approaches $5,000 per ounce. Hougan told Decrypt that this wealth creation is now spilling over, just as it did in crypto markets. ‘In any bullish market, when you have that much wealth created, of course it’s going to spill over,’ he said.

The primary beneficiary of this spillover in metals is silver. Its price has increased a staggering 228%, passing $100 per ounce for the first time. Hougan draws a direct parallel to crypto cycles, where investors who profited from Bitcoin’s rise subsequently rotated capital into smaller digital assets. ‘They made money in gold, now they’re going out the curve,’ he explained, describing the search for greater gains. The scale of the effect is dramatic: Hougan notes that a ‘$15 trillion wealth event’ spilling into a market like silver, which was below $2 trillion not long ago, can send prices parabolic. By Friday, silver’s market cap was estimated at $5.6 trillion, according to Companies Market Cap.

The comparison extends to the structure and behavior of the crypto market. Ethereum, Solana, and XRP are collectively valued at $453 billion, a fraction of Bitcoin’s $1.8 trillion market capitalization. According to CoinGecko, Bitcoin currently accounts for 58% of the total crypto market. Historically, these major altcoins are ‘more susceptible to price swings’ than Bitcoin, making them the ‘silver’ to Bitcoin’s ‘gold’ in terms of risk and reward profile. This relationship has been fluid; for instance, after Ethereum hit an all-time high of $4,950 in August, Bitcoin’s market dominance fell to 54% by October, indicating a classic rotation into altcoins.

The spillover effect Hougan describes isn’t limited to silver. Other precious metals like cobalt and palladium have also doubled in value over the past year. This broadening of the rally mirrors how crypto wealth effects eventually reached the market’s farthest edges. ‘Eventually, they’d be buying EtherRocks, or really crazy NFTs,’ Hougan said, referencing the speculative peak of previous cycles. The data supports this: four years ago, an investor paid $843,000 worth of Ethereum for a JPEG of a rock from the EtherRocks NFT collection on OpenSea. While only 100 were ever created, their utility is minimal compared to other digital assets, let alone tangible precious metals, highlighting the speculative extremes of wealth-driven rotations.

The crypto market landscape has evolved significantly since its last major cycle, particularly following the 2022 collapse of exchange FTX. Bitcoin’s market share has risen steadily from a low of 36% after that downturn, bolstered by the debut of spot Bitcoin exchange-traded funds (ETFs). These ETFs have allowed traditional financial institutions to gain exposure to Bitcoin, changing how capital flows into the asset class. Market participants have historically used Bitcoin’s dominance as a gauge for impending ‘altcoin seasons,’ but Hougan implies the pathways have changed. Investors allocated to spot Bitcoin ETFs cannot necessarily pivot directly to on-chain altcoins, potentially altering the mechanics of the spillover effect.

Despite these structural shifts, the core behavioral pattern of profit rotation appears enduring. The wealth effect, as Hougan frames it, is a constant in bullish markets. The recent trading activity in NFTs like EtherRocks—with only three changing hands in the past year, the latest for $189,000 in ETH—suggests that while speculative fervor may have cooled from its peak, the potential for spillover into niche, high-risk assets remains. The parallel between metals and crypto, therefore, is less about identical instruments and more about a consistent investor psychology: the pursuit of parabolic returns by rotating gains from established, large-cap assets into the next, smaller opportunity on the curve.