Smaller cryptocurrencies are starting to pull ahead of record-setting Bitcoin as traders bet the tokens are next in line to test all-time peaks.

An index tracking the bottom half of the largest 100 digital assets is up about 60 per cent over the past month, beating the 56 per cent advance in Bitcoin. During the same period, the overall value of tokens jumped by more than US$800 billion, according to data tracker CoinGecko

Market observers contend there are growing such signs of speculators rotating away from the largest digital asset into smaller rivals that have lagged in the Bitcoin-led crypto recovery that began last year.

“Our desk has been seeing strong flows and more excitement on non-Bitcoin assets recently,” said David Lawant, head of research at crypto prime broker FalconX. At one point five times as much investment was flowing into Bitcoin compared with second-ranked Ether but that has dropped to two times, he said.

Coins like Ether remain some way off hitting all-time highs, a reflection of the intense focus on Bitcoin amid the launch of landmark US exchange-traded funds for the token as well as an upcoming reduction in its supply growth.

“Bitcoin’s market dominance typically tops out in the weeks following an all-time high breakout,” Vetle Lunde, a senior analyst at K33 Research, wrote in a note. He added that ramped-up bets on altcoins are a typical feature of an “all gas, no brakes stage of the market.”

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Frothy wagers on Bitcoin have washed across the derivatives sector, evidenced by metrics such as elevated costs for perpetual futures and unprecedented levels of open interest – or outstanding contracts – at Chicago-based CME Group’s Bitcoin futures market.

That too is a positive backdrop for smaller digital assets, according to Jag Kooner, head of derivatives at crypto exchange Bitfinex.

“It’s anticipated that the surge in open interest will eventually redistribute toward altcoins as the market’s focus shifts away from Bitcoin, further out on the risk curve toward meme tokens, which accounted for a third of the volume on major exchanges last week,” Kooner wrote in a note.

Meme coins Shiba Inu, Floki, dogwifhat, Pepe and Bonk sat atop the seven-day performance charts at CoinGecko, with gains of about 150 per cent or more as of 9.20 am Wednesday in London. Bitcoin changed hands at US$67,250, a little shy of the record US$69,192 reached on Tuesday in US trading.

While crypto veterans might rationalise the meme trend as part of the pivot beyond Bitcoin, others could well see it as mindless speculation. BLOOMBERG