All Hail King Bitcoin: Why BTC Remains #1
Bitcoin has tripled in price since the beginning of the year – a move that not a whole lot of people saw coming – yet this time around altcoins have failed to follow in its footsteps… Why? In this article, we take a deeper look into what might be going on in the minds of investors that is preventing the expected “altcoin season” to manifest itself in the wake of bitcoin’s recent rise.
Hail King Bitcoin: Why BTC Remains #1 After All This Time
Normally speaking, within the context of the last 5 years or so, bullish momentum for BTC has usually translated into bullish momentum for altcoins. However, 2019 thus far has proven to be a rather lackluster year for most altcoins, as the total market cap of all altcoins has only doubled in comparison to bitcoin’s tripling. This has had the byproduct of helping BTC’s dominance of the total market cap percentage actually increase instead of decrease; the opposite of what happened in 2017.
Indeed, a few altcoins have had rather extraordinary rises in 2019, some even surpassing that of BTC’s. In terms of return on investment (ROI), Litecoin (LTC) is up 233%, Holochain (HOT) is up 223%, and Binance Coin (BNB) is up a staggering 408%. However, the list of coins that managed to beat King Bitcoin is much smaller than the list of coins whose ROIs paled in comparison. Take for example this year to date chart comparing the top 10 coins by market cap (excluding Tether, for obvious reasons).
All but 2 coins have a lower ROI than bitcoin, and Ripple (XRP) has somehow managed to be negative for the year thus far. Other traditionally “top tier” coins that have significantly underperformed in 2019 include IOTA (MIOTA), losing 1.7%, and Stellar (XLM), down a whopping 18%. No matter how you dice it, altcoins as a whole have not lived up to investor expectations in light of bitcoin’s magnificent rise.
Looking back at the great bull run of late 2017, the crypto market saw a declining dominance of bitcoin in the total market capitalization of all coins. This was due to the fact that even though bitcoin was rising to stratospheric new heights, the altcoin market as a whole was rising even faster. Coins like Ethereum (ETH), Dash (DASH) and NEM (XEM) – among countless others – were experiencing drastic gains in magnitude that BTC had not seen since 2011. Thus, even though the total market cap of all coins was rising, bitcoin’s relative share of this metric was on the decline. This can be visualized in the chart below, which shows BTC’s percentage of the total market cap (top line) sinking throughout the year as compared to other coins.
In 2019, however, a different picture has emerged: BTC is up, but altcoins as a whole are not up very much at all. This has led to an increasing dominance in the total market cap by bitcoin, rising from 52% on January 1st to 65% today. Likewise, the percentage of the total market cap held by other coins has been on the decline, meaning most of the new money flowing into crypto has been aimed at bitcoin.
So what gives? Why hasn’t there been a terrific “alt season” yet for altcoins in 2019? Well, a number of theories abound. The one most popular with altcoin holders – particularly those who recently plunged their money into alts thinking that they would be due for a 2017-like boost thanks to a rising bitcoin – is that there is a lag currently occurring and that a renewed interest in the altcoin markets is just around the corner. Another theory, though not nearly as popular, is that altcoins were simply far too overvalued the last time around. In 2017, there seemed to have been a lot more optimism about what the future of cryptocurrency held. The idea was catching on that the general public may one day soon be ready to adopt not only bitcoin but a whole host of other coins as well, each one being able to fill a particular niche in the online economy.
After years of being overwhelmed by skeptics and a larger feeling of irrelevancy, the attitude of crypto enthusiasts in 2017 – encouraged by a largely prosperous 2016 – was that a blockchain solution could be applied to almost any problem, and that everything could be tokenized. In the fourth quarter of 2017, it truly looked like the sky was the limit for cryptocurrency. Globally-speaking, investors poured billions into highly-questionable projects, hoping to get in on “the next bitcoin.” Pretty much every cryptocurrency with the word “coin” in its name saw a rise, from Potcoin (POT), to Sexcoin (SXC), to PutinCoin (PUT).
The most notorious of coins to benefit from bitcoin’s rising tide was undoubtedly Bitconnect (BCC), which even managed to crack CoinMarketCap’s coveted top 10 for a couple of months. Though 2018 saw a surge of ICO projects that made 2017 look tame by comparison, a damper was put on the mood of crypto investors when a study revealed that up to 80% of the ICOs conducted in 2017 had proven themselves to be scams. Indeed, the market had grown too rapidly, and it was beginning to be impossible to sort out legitimate projects from the illegitimate. Dozens (if not hundreds) of Ethereum tokens that started out with good intentions are now all being thrown into the same branding as scam projects, perhaps even along with Ethereum itself.
To make matters worse, the rate of crypto adoption hasn’t been happening nearly as quickly as the markets are reflecting, which means that an even larger percentage of the total market cap is speculation-based than before. The third and fourth quarters of 2018 saw some major corrections occurring, with several coins having 50-80% of their market cap wiped out. Many of these coins will likely never recover, as perhaps they had simply been over-valued for far too long. Popular crypto Twitter personality Peter McCormack perhaps put it best in a recent tweet:
The reason you haven’t had an alt season is simple. You all know that alts are junk and aren’t worth shit.
You’re hoping for more clueless morons to pump this shit but they aren’t here. 2017 was a one off, we were all clueless.
Buy Bitcoin, go long, STFU!
— Peter McCormack (@PeterMcCormack) July 10, 2019
After all these years, BTC is still number one; more firmly now than it has been since April 2017. This fact stands even in the wake of potential “Bitcoin Killers” whose popularities have most likely already waxed and waned (the likes of which include ETH, BCH, and most recently, BSV). Bitcoin remains the increasingly-dominant cryptocurrency for some good reasons:
- It is the oldest, most dominant, most respected of its class, having achieved by far the greatest penetration of real world use case scenarios.
- It has some of the most innovative, experienced and well-funded minds working to make it better, allowing for its evolution in the face of stiff competition (Blockstream, Bitcoin Core, Lightning Network developers).
- It is the most trusted and secured of all blockchains, with over a million individuals likely to be mining on its network at any given time.
Of course, anything could happen in the future, and it’s surely possible that one day King Bitcoin will be overthrown by a worthy competitor that is perhaps better suited to meet the public demand for a permissionless, decentralized digital currency. However, for the time being, BTC reigns supreme in not only market cap, but in having the elements required to attract a wide stream global audience — a potential crowd of users that as of yet has been barely tapped into, even after 10 years in the making.