What Bitcoin’s Recent Wild Stretch Means For Other Cryptocurrencies
The Bitcoin family has had a pretty wild stretch. In just the past two weeks, it was subject to extreme volatility even by cryptocurrency standards, saw a spinoff token take center spotlight of the entire digital asset markets, and even witnessed a highly anticipated project get unexpectedly aborted, all leaving the market to go even crazier than usual.
Flip the calendar back to November 8th, when Bitcoin (BITCOMP) was cruising along, peaking at yet another record high by clearing the $7,800 mark for the first time. But just days later, a plummeted price of under $5,500 per coin left many investors frantically panicking if Bitcoin was losing its firm grip on the market.
Bitcoin primarily spiked as high as it did because developers behind a proposed upgrade to the currency called SegWit2x announced they were suspending plans. Scheduled to take effect around November 16, the upgrade was proposed in an effort to increase the speed and cost of bitcoin transactions. However, more and more major Bitcoin developers dropped their support in the last few months, and the prospect was ultimately dividing the Bitcoin community too much to go forward with.
Directly related to Bitcoin’s jumpy behavior was Bitcoin Cash (BCH), the byproduct of Bitcoin’s first fork back in August and newfound rival in the market, which also experienced erratic activity during this period. Trading in the low $600 range on the same day that Bitcoin crossed the $7,800 mark, Bitcoin Cash, which maintains the third largest cryptocurrency market cap at over $20 billion, suddenly skyrocketed to over $2,600 on nearly all exchanges over the coming days. Due to SegWit2x’s cancellation, many ardent investors were dumping their Bitcoin and pouring that capital into Bitcoin Cash, a token which better embodied the vision that supporters of SegWit2x had in mind. Some people even thought that Bitcoin Cash was the new Bitcoin due to the upgrade.
Just days later, the market decided that Bitcoin had become significantly devalued after dropping by more than 30% of its value, so loads of investment money came pouring back into the market leader, effectively curtailing its plunge and spearheading its bounce back. Simultaneously, Bitcoin Cash came crashing back down towards Earth. Currently, Bitcoin’s bull run is back in full effect, trading at around $8,000 apiece, while Bitcoin Cash has depreciated by half its peak value and retreated to a trading value in the low $1,000 range.
Finally, the ever-controversial Bitcoin Gold (BTG), whose uniqueness from Bitcoin and Bitcoin Cash stems from the algorithm it runs and the method behind how its mined, has been stirring up headlines in the news recently as well. The coin, which upon launch in late October sought to “make Bitcoin decentralized again,” received negative attention as one of its developers allegedly integrated a 0.5% fee into a mining pool that redirected to his own e-wallet. The coin has experienced sharp movement in its short lifespan, flirting with prices around $500 at times, yet currently trading at just $150 per token.
And while most keep their eyes glued solely to stories of this nature which headline the news outlets, there are instrumental lessons to be learned from all this activity going on in the Bitcoin world going unnoticed. Specifically, what does it all mean for the other cryptocurrencies, dubbed “altcoins,” out there?
The amount of legitimate, regularly traded cryptocurrencies out there is approaching 1,300 according to Coinmarketcap.com, the authoritative resource for financial and statistical information on digital assets. And while this number is on the rise, for the most part, only tokens that start with “Bitcoin” track any significant attention from the general population within the cryptocurrency world.
And ever since Bitcoin’s market returned to a more ‘corrected’ standing after its recent price resurgence, most people are quickly forgetting about the underlying concern which prompted the SegWit2x proposal in the first place. Bitcoin’s core issues remain, while interest, demand, and competition for the coin keep gaining momentum. Countless currencies conceived since Bitcoin are learning from its model’s issues and lack of scalability, blockchain limitations, supply issues, and potential others. These issues will be revisited, and perhaps next time will, in fact, create a deep divide within the Bitcoin community.
Take for example Litecoin (LTC), which is currently the 5th highest valued cryptocurrency. Former Google engineer and Litecoin Founder Charles Lee’s motivation behind the coin’s creation was literally to improve upon Bitcoin’s blockchain limitations. The outcome? A blockchain boasting a 2.5 minute time to generate a block in comparison to Bitcoin's 10 minutes.
Other tokens, like Ripple (XRP) and Basic Attention Token (BAT) are providing tangible value to the world beyond servicing it as just a peer-to-peer currency. They are revolutionizing the way money can be wired across the globe and optimizing how humans surf the web through innovative technology, respectively. To this end, it’s important to view these cryptocurrencies in a more stock-oriented approach, prompting ICOs to keep bringing more people and more funds into the industry.
But for now, the world is clearly most hungry and stimulated by the primitive, purely decentralized entity that Bitcoin is, even though it is abundantly clear that the Ethereum (ETH) network and other digital assets are more powerful and versatile. But imagine if in 10 years, applications with user-friendly interfaces accept all sorts of cryptocurrencies to be used in transactions, Bitcoin’s unique appeal will surely fade somewhat. Moreover, Bitcoin is by far the most commonly used means to get involved in ICOs today, but when cryptocurrencies start seeing integration into more platforms, Bitcoin will lose exclusivity in this regard, and people won’t need to rely on in to acquire new offerings.
The smartest investors right now are studying Bitcoin’s shortcomings, not its short-term success. Likewise, the most vigilant digital currency companies, including ones that haven’t even launched yet, are studying how they can organically learn from Bitcoin’s exposed flaws.
Here’s the truth on Bitcoin: beyond its premier level of development and being extremely easy to acquire through Coinbase.com, the factors contributing most to its lofty valuation are name recognition, nonstop press, and the fact that it was the first one in the door to an industry it pioneered.
And this isn’t to knock the legitimacy of Bitcoin; its novelty in concept, execution, and support are a marvel that has taken the entire world by storm. But remember that this is just the beginning, and these past two weeks have further exposed where Bitcoin falls short and how it can potentially decline in the face of smarter, more efficient and scalable digital assets. And especially as Bitcoin singlehandedly dominates industry headlines, its competitors are watching closely behind the scenes and taking notes.
And while Bitcoin joining CME’s futures market being recently announced has drastically hiked the prospect of its long-term value, we must again maintain vigilance that this is just the beginning for cryptocurrencies. Moreover, competition keeps mounting against Bitcoin; a recent Bloomberg release stated that Ethereum may get a derivatives market of its own.
Given its position as the original blockchain protocol, it should come with no shock that Bitcoin has a market cap dominance percentage hovering around 55%. In a $235 billion market, that’s astonishing, but we have to look at the historical trend to stay in context. When we do that, we see a stark decline occurring: Bitcoin’s market dominance was at 72% in May and over 90% in 2016.
People trying to make short, quick money overnight will still be looking primarily at Bitcoin to achieve their fast-cash goals. However, if Bitcoin has taught us anything recently, it’s that the token is far from perfect, leaving the cryptocurrency world to figure out how to learn from its imperfections. Altcoins, future digital assets, and investors should judiciously look beyond the Bitcoin-dominated headlines that have oversaturated the current moment to benefit in the long-term. For example, Crypto Stack is one of many resources that focuses less on price shifts than it does the direction of the market, offering in-depth coverage of blockchain technology and the cryptography foundation that fuels the new age of currency.
Is it possible that Bitcoin remains the market leader for the next 10 years and on? Absolutely. At the same time, we have no idea what the cryptocurrency market landscape will look like a decade from now and given altcoins’ continuously increasing market share despite Bitcoin’s explosion, really anything is possible. One thing remains clear, however: those concerned with capitalizing on the future of this movement must see it as a marathon, not a sprint. They should dig deeper to see what the core issues at play are rather than merely anticipating Bitcoin’s price for the upcoming week. Because, in the end, the former will determine the winner of the race. As always, only time will tell.
Disclaimer: The ideas expressed in this writing are my own personal opinions and should not be taken as financial advice in any regard. Individuals or institutions seeking to invest in the any of the ...
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I still can't believe #bitcoin is trading at over $8000! I thought about buying at $300 but was sure it was a fad. $Bitcomp
I never would have imagined it either. I wonder how high #bitcoin will go! $BITCOMP
What was the highly anticipated project to "get unexpectedly aborted?"
Hi Susan - This was referring to the SegWit2x upgrade that was suspended, which I describe in more detail a couple paragraphs later in the article. Thanks for reading!
Thank you @[Nathan Feifel](user:56139). While I find #bitcoin and #cryptocurrencies intriguing, I've always found them somewhat confusing. Thanks for clarifying for us older folk.
Extremely interesting analysis of the the cryptocurrency market that looks past the typical short term price differences. Personally I believe that bitcoin and other cryptocurrencies are bubbles but that the blockchain that powers them is revolutionary. I also believe that bitcoin will surge in value as CME unveils futures and options which will lead to bitcoin ETF's. These thing will for the first time allow investors to buy bitcoin easily through trusted brokers, leading to surging demand and eventually a bigger collapse. #bitcoin #blockchain #altcoins