Following my previous post regarding my Bitcoin predictions for the coming weeks, I predict we will see most of the Bitcoin which is sold over the coming weeks being cashed out to fiat although I think that overall, this recent Bitcoin surge will do good things for alts.
I dug out some interesting facts from within the last month regarding the global crypto market charts on Coinmarketcap:
- Overall crypto market cap soared from 150b to 200b
- Bitcoin market cap increased from 70b to 120b
- Altcoin market cap increased by a mere 2b
This would suggest that the 50b growth in the btc market cap came mostly from fiat, meaning that a large % of the people looking for short term gains will likely cash out into fiat. However, I also expect a significant portion of the Bitcoins being sold to buy alts as well as fiat profit from selling Bitcoin to go into alts for the following reasons:
-1) Bitcoin is the gateway drug into alts. More people learning about Bitcoin means more people learning about alts.
Most of the Bitcoin surge has been due to institutional money as well as forks of Bitcoin offering people new “free” coins, neither of which improve the functionality or utility of the original Bitcoin. Therefore this value increase in the price surge of Bitcoin will likely be short lived.
Should the alts rise as btc falls as myself and many crypto enthusiasts predict, interest in alts will increase yet further for the weeks and months to come and be introduced to many newcomers to the space who originally were only interested in Bitcoin.
Plus, let's face it, alts with high double and even triple digit growths are much sexier than Bitcoin.
-2) Bitcoin losing 10-15% value should affect the alt market positively overall since alts are priced in btc. I will be buying back into btc gradually from the point at which it drops 10-15% from it's peak.
-3) The crypto industry is far less established and far more volatile than traditional industries as was seen with Bitcoin dominance going from 87% down to 39% and back up to 62.5% all within the LAST YEAR.
Bitcoin is the king for now but it is miles away from Google/Apple style market dominance, making it vulnerable to a takeover by alts which solve a wider variety of pain points and in some cases are simply superior to Bitcoin in many respects.
-4) Since Bitcoin dominance increased from 37.8% to 62.5% (recent low and recent peak), it has not undergone any major transformations to increase it's value relative to alts. Segwit barely made a difference and even that only touches the tip of the iceberg of the problems which Bitcoin is not yet suited to solve. These include super fast and cheap transactions like Ethereum, Litecoin, PIVX and many other alts have, not to mention the countless other potential uses for Blockchain technology.
With that information in mind, it is only logical that the current Bitcoin dominance is not sustainable. The chart below shows Bitcoin’s recent lowest level of dominance compared with it’s dominance today (i.e. 60.65%, already down 2% from it’s peak).
The orange line represents Bitcoin’s share of the market cap and the dark blue line represents the alt coins’ share of the market cap. Without major utility added to Bitcoin during this time and without decrease in utility offered by alts, it is hard to see this trend as sustainable.
Short term investors intending on selling their Bitcoin after the upcoming fork in mid November with the goal of short term gains further adds as evidence that the Bitcoin dominance growth is unsustainable.
-5) Bitcoin is the stately and powerful heavyweight Elephant, but alts are the agile and aggressive Tigers.
One elephant is no match for hundreds of hungry tigers, especially if it starts becoming over confident.
Alts have the potential to move much faster than Bitcoin in terms of their technology development and/or price.
Although things have cooled down on the price side of alts over the past month (just 2b growth in USD value), nothing has changed on the technology side, they are still fighting ferociously to solve the problems which Bitcoin will not be suited to solve for the foreseeable future. Smart money will take note of this.
-6) Many prominent alts such as LTC, QTUM, OMG, ETH have fiat gateways (can be purchased using fiat), giving plenty of opportunity for cashed out fiat profit from BTC to go into these alts.
-7) Bitcoin may be a hedge for the alt market, but people forget that the alt market can also be a hedge for Bitcoin. If there was any time people were looking for a hedge for Bitcoin over the past 9 months or so, it would be now.
-8)Furthermore, it appears that the tigers have already started fighting back, slowly but surely preparing their attack as can be seen by the graph below of the market cap excluding Bitcoin.
Note how we have seen higher lows and higher highs with a steady uptrend since October 24th, a lot of which is due to Bitcoin cash which is one of the first alternatives which Bitcoin-only investors may turn to after taking gains from their Bitcoin investment in the past month.
The above is naturally all speculation which is often derided by conservative people with low risk tolerance. I prefer the term educated guesses since there is no point in investing if we don’t at least attempt to predict the future and certainly no point if we don’t try to educate ourselves on the probability of potential outcomes.
I've got my money where my mouth is with 89% of my folio in alts, 4% in an ICO and just a 7% fiat reserve.
40% are alts with fiat gateways in the Top 15, the rest are more speculative plays, with a total number of 17 cryptocurrencies.
Disclaimer: This is not investment advice, trade at your own risk.
My goal with this blog to connect with other crypto investors and traders but also to help inform newcomers to the crypto sphere. So I’d be delighted to hear your opinions, questions and substantiated counter arguments in the comment section below.
Image sources: coinmarketcap.com and hafidzmusa.blogspot.co.id/2012/12/malayan-tigers-vs-war-elephants.html