The Market For Deadcoins As Bitcoin Prices Recover
Since we launched CoinJanitor, we have been looking at how cryptocurrency markets are moving, trying to understand how they affect the pursuit of our goal. As many people would think, we have seen more coins join deadcoin lists throughout the bear market of 2018. As ICOs failed, the deadcoin market swelled up. What we were not expecting, was that the number of deadcoin projects seeking out a buyout would rise as Bitcoin prices recovered. Following this observation, we have refined our theory about how markets produce deadcoins.
Bear Markets Sow, Bull Markets Harvest
The previous bull market ushered in the era of the ICO. Most of the new coins that hit the market were doomed to fail, but so much money was coming into crypto that funding for new projects was relatively easy to get. As more projects got funded, more new projects came into the space, until Bitcoin — and cryptocurrency — prices started crashing.
Without demand in the form of new money coming into the space, all the projects that were based on deeply flawed architecture and bad assumptions, were bound to fail. Nevertheless, many still had their funds which allowed them to survive throughout most of the bear market. Then, towards the end of it, these projects finally tanked. As the bull market came in, Bitcoin prices picked up and money started flowing towards top ranked cryptocurrencies again — a trend we have pointed out repeatedly in various discussions.
Market Consolidation
This market consolidation has created an interesting situation in which Bitcoin dominance is rising to levels that we haven’t seen since April 2017. As Bitcoin dominance rises — consolidation — coins and projects that are at the bottom see their market caps drop. That, combined with funds that are running low, pushes them to deteriorate.
What Does This Mean for CoinJanitor?
When it comes to deadcoin acquisitions, the whole cycle is incredible informative, if our observations about this cycle become a discernible pattern in the future. As it stands, the most recent bear market sucked the air out of the ICO bubble, relegating a record number of coins to oblivion. The subsequent bull market is consolidating wealth around Bitcoin primarily, delivering the final blow for hundreds — if not thousands — of projects at the bottom of the market. CoinJanitor will therefore benefit from the whole cycle, from bull to bear to bull again. As more coins die through this cycle, more communities and more developers are forced to re-assess their situation creating more buyout opportunities for CoinJanitor.
On the other hand, as more coins die, and thanks to the fact that CoinJanitor has proven itself as the go to recycling mechanism in the space, there will be more raw material to feed the CoinJanitor economy. This means deadcoins should become cheaper to buy and demand for CoinJanitor as a solution should increase. Hopefully we will see the impact of this full cycle in terms of the number of deadcoin projects we can buy and the number of users we can integrate. If this cycle becomes a market pattern, CoinJanitor will have an encouraging growth outlook going forward.
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