Are Altcoins repressing the market of the King of Crypto?
Do Altcoins move up with Bitcoins? Will neoteric coins surpass the King in near future? Do you also stumble upon these questions now and then? Let’s try finding answers to some of the questions.
“Cryptocurrency will change market structures and maybe the architecture of the internet as well.”— Abigail Johnson, CEO, Fidelity Investments Inc.
Altcoins have reached new heights in the market of Crypto, with some even scooping away Bitcoin’s market share. ‘Of the global crypto market capital of $2 trillion, Bitcoin’s market share is 39% as of Jan. 14, down from about 70% from this time last year,’ according to TradingView.
In simple words, altcoins make up more than 60% of the crypto market. Bitcoin’s infamous opponent, Ethereum blockchain’s Ether (ETH), stands at 19%, but it’s the smaller altcoins that are more of a threat to Bitcoin’s long-term dominance as more investors are trying to find the next big coin that may skyrocket. New cryptocurrencies like Cardano (ADA), Avalanche (AVAX), Ripple (XRP), and Polkadot (DOT) are on the rise and tout more functionalities than Bitcoin. Investors, who want to join in this growing market, need to understand why altcoins are gaining on Bitcoin.
WHAT ARE ALTCOINS?
Ever since the advent of Bitcoin in 2008, the world has undergone a “Crypto Revolution”, with the launch of numerous cryptocurrencies grouped as Altcoins. The altcoins, derived from ‘Alternate’ and ‘Coins’, incorporate all the cryptocurrencies introduced other than Bitcoin. There have been nine major currencies introduced after the King made its presence in the market namely, Ethereum, XRP, Tether, Cardano, Polkadot, Stellar, USD Coin, Dogecoin, Chainlink, and Uniswap. Given below is a portion of the current significant pails altcoins can fall into:
- Stablecoins: With Tether, becoming the first stablecoin, this category refers to the decree currencies just like a US dollar. These are less volatile with a closer resemblance to the currencies one uses every day.
- Memecoins: Heard of Dogecoin? Yeah, that’s a meme coin. These are quite popular types of altcoins that are bought up by influencers and trend followers.
- Utility Tokens: The category of Altcoin, developed specifically for allowing users to pay for transactions, including fees to publish mint tokens, trades services, and receiving certain limited access within any Blockchain Network. Being one of the most flexible utility tokens, Ether lets the users pay mint currencies, digital forms of arts, and much more on the Ethereum Network.
- Governance Tokens: Falling under the category of Utility Tokens, the governance tokens purchase certain voting privileges, for instance, the ability to participate in Blockchain-wide polls. Maker (MKR), a good example of this category, allows its holders to vote on decisions about the decentralized finance (DeDefi)protocol.
- Security Tokens: These are the digital liquid contracts representing portions of a real asset like a business or real estate. SolarStake and L’Osteria are two examples of security tokens.
- Forks: A category of Altcoins that comes from the programmers who make significant changes in the protocol of a Blockchain altering how the crypto is recorded, traded, or used. These are ‘soft forks’ and ‘hard forks’. Bitcoin Cash is an example of a fork.
THE DIVERSE UTILITY OF CRYPTO
Altcoins are used as digital currencies or cryptocurrencies and have varied usages in the industry. Blockchain Technology brings to the forefront, diverse innovative measures like trusted transactions, automation, P2P finance platform, and many more. These applications work on principles that do not relate to Bitcoins.
According to Clayton Gardner (co-founder, and co-CEO of Titan),
“Altcoins are gaining on Bitcoins because the industry is leaning towards different crypto sectors that have different value drivers such as smart contract platforms, Defi (decentralized finance) apps, NFTs (nonfungible tokens), play-to-earn games, distributed storage platforms, etc.”
The opportunities are finally being recognized and achieving meaningful adoption. These applications are the building blocks for developing new paths for consumers and businesses for digital interaction and management.
INSTITUTIONAL INVESTMENT IN ALTCOINS SOARING HIGH
With the digitalization of the world racing over time, digital assets are gaining attention among institutional investors. They tend to have a lot more money than any potential average investor, with the courage to be able to take risks in financial terms. They often fill the speculative assets and more mainstream interest has adhered to.
Institutional capital is continuously moving past the simple question of ‘whether crypto or not’ and ‘where should I invest in?’. With the growing popularity of crypto, investors have started to ponder over the future of Blockchain and its present value in the market sectors. Altcoins are benefitted from this trend as they represent one of the biggest tech archetype shifts in the coming years.
ALTCOINS ARE CHEAPER THAN BITCOIN
While the price of Bitcoin soaring at about $37,715 as of Feb, 2 and has also gone as high as $60,000, the Altcoins are not that unaffordable making them accessible to individual investors. The Crypto trend is growing day by day and investors are looking for cheaper and more affordable coins to invest in which gets them to the doors of the new Altcoins which are quite cheap in front of the King itself. Apart from the low investment, these have the most upside potentials.
Rodrigo Vicuna (chief financial officer at Prime Trust) quoted,
“Altcoins provide a comfortable entry point and an opportunity for asymmetric risk.”
Moreover, the upside potential of low investment is much bigger than the downside risk of falling to zero. For example, Litecoin(LTC) is prominently cheaper than Bitcoin with its price fluctuating from $4 in Jan 2017 to $347 in May 2021 and the current being about $110 in Feb 2022. The trend has shown clearly signifies a prominent gain from its initial investment in its early days six years ago.
CONSTANT INNOVATIONS IN ALTCOINS
All new technological advancements are the outcomes of the shortcomings of a great invention. Just like that, Altcoins are developed keeping the shortcomings of Bitcoin as the core idea. An instance being Ethereum, allows multiple applications like automation and broad interaction within the network. The Altcoin XRP mines its coins in a simpler way than the process of Bitcoin. Solana (SOL) was developed to provide a more secure and scalable at a cheaper price when compared to Bitcoins and Ethereum.
Each crypto has its own protocol(the rules for operating a network). In the case of Bitcoins, users trade them through digitally signed encrypted messages. Each Altcoin has its own unique protocol which makes the structure of the Blockchain. Currencies with strong use cases signify that they have strong fundamentals to survive longer in the race of the crypto market.
ALTCOINS CAN BE USED TO MANAGE RISK
Most Altcoins are traded because of their high probability of early returns on investment. According to experts, Altcoin investors can use tokens to manage their risks as they don’t require a much larger investment. In order to maintain a profit with minimal risk, one should look forward to the assets that gain strength in the areas like Metaverse or GameFi or maybe launch some distinct set of chains to automate and reward users with continuous investments despite the changes witnessed in Bitcoins.
Metaverse and GameFi are the recent infamous developments with huge future prospects. While all categories of blockchain have been blazing hot in 2021, GameFi and Play-to-earn took the top spot with nearly 13% of all investments. Investors must look through these recent developments to play safely in the market. The greatest risk-mitigation technique of Altcoins is for users with a long-term Horizon.
ALTCOIN SEASON
The term refers to the Altcoins gaining the momentum that could challenge Bitcoin’s position in the market, with one or maybe more Altcoins surpassing it. Ron Levy, co-founder, and CEO of the Crypto Company says this “flipping” is inevitable. Bitcoin is the one crypto that has a strong use case, but there is a series of Altcoins that offer a wider range of purposes and applications. Not just Ethereum, but now there are thousands of them coming in the way. Apart from this, there is a very high probability of Defi, gaming and the metaverse will allow Altcoins to gain dominance in the market.
The market has always been unpredictable but the potential that Altcoins possess cannot be neglected. Although the king has its dominance all over the world yet one can never guess the precise outcome. But definitely, the battle is thrilling to experience.
CONCLUSION
Summing up the article, we got the following reasons why altcoins might eat away the Bitcoin’s market share:
- The use of cryptocurrency has diversified with the focus of the tech giants shifting more towards Blockchain Technology.
- The institutional investment in Altcoins is soaring high.
- The cheaper cost of investment in Altcoins than Bitcoins is attracting the average investors.
- Altcoins are being innovated constantly with each surpassing the loopholes of Bitcoins.
- Altcoins can be used to manage the risk factor involved in investments.
- According to the renowned investors, there might be a bigger ‘Altcoin Season’ approaching shortly with one or more Altcoins Sweeping away the Bitcoin market.
