Why Are Altcoins Dying, and What Might Happen to CryptoCurrencies Soon?

CryptoRank
Feb 7 · 7 min read

Bitcoin’s dominance was at a high level, but during the ICO and altcoin boom in 2017, Bitcoin’s dominance dropped from 86% to 33%. After that, altcoins began to lose their value and the dominance of bitcoin soared again, reaching almost 70% in 2019. But at the beginning of 2020 altcoins made themselves known once more, which is why they were able to shake the dominant position of Bitcoin a little.

https://t.me/CryptoRankNews/1235

During the existence of the cryptocurrency market, many proclaimed the death of both bitcoin and altcoins multiple times. But what happened to cryptocurrencies during this time? Let’s try to delve into the situation.

How Many Times Has Bitcoin Been Predicted to Die?

At the time of writing this article, according to 99bitcoins.com, Bitcoin has been buried 379 times. In 2019, major media outlets announced the death of Bitcoin 41 times. The last time this happened was on December 31, 2019, when an analyst visiting Yahoo called Bitcoin a pyramid scheme..

However, Bitcoin invariably continues to hold the top position, but most of the 20 largest tokens since 2013 have almost completely disappeared and replaced with new ones. The projects like Namecoin, Peercoin and Feathercoin were replaced by Ethereum, Monero, and EOS.

These famous projects of 2013 have not only disappeared from the memory of the cryptocurrency community, but some were completely abandoned, and the price of their token fell many times or lost its liquidity on the exchanges.

Why Do Altcoins Die?

Altcoins are disappearing so rapidly that sites appeared in an attempt to track such tokens. There are 1,839 dead projects on the deadcoins website, and 1,407 such projects in the coinopsy database. Some projects are ready to buy such tokens of disappearing projects to make the crypto space cleaner. Such projects include, for example, the “coinjanitor”.

The largest number of projects died in 2018. This is understandable since the largest number of altcoins appeared in 2017 with the ICO boom and, unfortunately, they began to die as quickly as they appeared. And in 2019, the number of abandoned projects has significantly decreased to the lowest level. This is due to the fact that in 2018 there was a calm in the cryptocurrency market, bitcoin was at the bottom, and there were much fewer token sales and new coins. Also, in that situation, fewer people wanted to cheat someone because it had become much more difficult to collect easy money from the market.

According to Coinopsy and CryptoRank, the most common cause of altcoin “death” is the fact that tokens run out of liquidity on the exchange — no one wants to buy or sell the token. Also, many coins can not be called truly “living” because, according to data from the Etherscan Explorer, there are 235,267 token contracts and many tokens could not even be admitted to trading on exchanges.

And often in addition to inflated social networks, there are no real users behind the project. Whitepapers of projects are copied and look like a marketing page, which is difficult to take into account seriously.

Tokens can die for various reasons: hacks, because the project turned out to be a scam or a Ponzi scheme, failed to raise funds, or simply because the creators have no interest in further developing. The most frequent cause of death of tokens according to coinopsy is due to the fact that the token stopped trading and the volume of its trade fell to zero.

In our opinion, the situation looks a little different. Yes, there are almost no cases when a token dies because its price falls to zero, and the death of the token occurs gradually as its liquidity is lost on the exchange. But many sites that track the death of tokens do not take into account the fact that more than 90% of the market’s claimed volume is several times higher than in actuality. Therefore, we have made a ranking of markets, where the trading volume has been significantly adjusted.

It’s not difficult to find an example of a token which has already died, yet continues to be traded for a significant period of time.

You don’t need to go far to find evidence of token, which actually dies, but still have big trade volume.

Look, for example, at the Shine Chain token(SHE), which is traded on the FatBTC exchange. At the time of publication, the exchange claims a daily volume of $ 3,600,212 for the token. This volume is comparable to the top coins on the Binance exchange. The Twitter account of this project has not been updated since mid-2018, as well as their other social networks. Networks are not available at all. And at the same time, trading volumes have also increased sharply since 2019. Moreover, the manipulation is indicated by an almost depth of market, which at these volumes of trade should be much denser and the same trading volume by day. It seems very strange, doesn’t it?

https://www.fatbtc.com/trading?currency=SHE%2FETH

Millions of turns on dead projects without a community and with a finder who is probably already busy with other things.

When no real user buys this token, then the volume of the token on the exchanges sharply disappears.

Every day we receive a lot of new tokens that can be added to the CryptoRank, but many of them do not have any reasonable interest and are “dummy,” so it is not advisable to add them.

How did altcoins fall in 2019?

In 2019 there appeared far fewer projects on the market, and it would seem that their quality should increase. But in 2019, many old and new projects continued to fall. Many projects that had high expectations lost more than 90% of their value, and some lost all of 99%. Having invested 10,000 $ in such projects, a person would be left with only 100 $.

If there was an IPO boom in 2017, then in 2019, the ICO was replaced by IEO, which were supposed to improve the quality and performance of projects after entering the exchange.

IEO is an initial exchange offer, as its name implies, held on the exchange’s platform.

Unlike Initial Coin Offerings (ICO), when raising funds on IEO, the exchange itself acts as an intermediary between investors and the project. Exchanges were supposed to help projects build a good economy, set a period when you can’t move or sell your tokens to projects, and select only high-quality projects. However, most exchanges used the IEO hype only for their enrichment and did not worry about the long-term success of the projects they helped raise funds for. The release rates of project tokens after raising funds on the most well-known exchanges with a good reputation were quite high at the peak of IEO. For example, as of July 2019, the average ROI for one of the main Binance exchanges was 450%, but in just six months, the ROI of projects fell to 72.92%, and for many other exchanges, this indicator shows a negative value at all. For other exchanges, you can view the ROI online.

What to expect next?

As a result, as before, the situation for most altcoins and exchanges has not changed. Exchanges continue to manipulate trading volumes and chase short-term opportunities to earn profits.

And many altcoins also continue to fall, and it is very likely that they will continue to fall to the bottom even further and lose their value and liquidity. This is also a consequence of the fact that most of the tokens in each specific project are still at the launch stage and will only be unlocked for a few years, which will increase the pressure on the price. Most tokens also do not have a deflationary or other model that would help keep the token afloat.

But, many are waiting for the second year for a jump in altcoins, because the profit that they showed in 2017 was very tempting. And in January 2020, many altcoins again made themselves felt showing growth.

In 2020, large projects like TON, Dfinity, Polkadot can enter the market, and also large stablecoins, for example, Libra or DCEP(Digital Yuan) can bring additional liquidity to the market.

The concentration of capital in coins with the highest market cap increases. According to CryptoRank, the top 20 tokens represent a very significant 87.6% share of the total market cap. And the dominance of these tokens will likely continue to increase with the continued outflow of liquidity from small coins.

CryptoRank

Written by

Research, Backtest and Trade Your Investments

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade