According to CoinDesk, altcoins are outperforming bitcoin and ether, indicating that investor interest is broadening beyond the largest cryptocurrencies. The total crypto market capitalization has rebounded to $1.74 trillion from $1.61 trillion in a week, with alternative cryptocurrencies like Solana's SOL, Avalanche's AVAX, and Internet Computer's ICP leading the recovery. SOL has risen 27% to $103, nearly reversing losses seen following the Jan. 11 debut of spot-based bitcoin exchange-traded funds (ETFs) in the U.S. The rally comes amid surging user interest in Solana-based trading aggregator Jupiter, where volumes topped the $500 million mark on Monday, surpassing the activity on industry-leading decentralized exchange Uniswap.

AVAX has rallied over 25% in one week, while tokens such as ICP, NEAR, DOT, and XMR have added between 13% and 22%. Bitcoin, the largest cryptocurrency by market value, has gained nearly 10% to trade above the widely tracked 50-day simple moving average at $42,870. Ethereum's native token, ether, the second-largest coin, has risen just 0.6%. The underperformance likely stems from market makers trading against the direction of the price move, thereby arresting the upside price volatility. Alex Kuptsikevich, a senior market analyst at FxPro, said in an email that the consistent positive performance of altcoins over the past six days is setting up optimism, setting up bitcoin for a test of $46,000. However, Kuptsikevich noted that the outperformance of altcoins may be short-lived and not to expect sustained demand for smaller altcoins or meme coins this year.

The U.S. Federal Reserve will announce its rate decision on Wednesday at 19:00 UTC. The central bank is likely to keep the benchmark borrowing cost between 5.25% and 5.5%, with markets now anticipating a first rate cut in May instead of the previously expected March. The focus will be on how fast policymakers intend to unwind the 11-rate-hike streak or the so-called policy tightening that began in March 2022 and peaked in June 2022. Tagus Capital said in its daily newsletter on Tuesday that the market is sensitive to the Fed's tone, with a dovish policy easing shift potentially boosting risk appetite and directing more capital into Bitcoin and related ETFs.