Bitcoin Winter is Hurting Altcoins

Bitcoin's deep plunge tests HODLers again — Bitcoin’s decline from last December’s record high of almost US$20,000 is now at about 80 per cent

Maligned Bitcoin Cash forks, Bakkt delays and SEC regulation on ICOs aside, there’s still a lot of momentum for digital assets. You wouldn’t know it judging by the prices, as Bitcoin has dropped into Crypto Winter mode.

$3,557 today is the price of Bitcoin; that’s some ‘correction’ since the relative stability of over $6,000 we saw in the summer months. The bearish market is also hurting altcoins as they struggle to avoid software and community death in the big crunch for digital assets of 2018.

Bitcoin Big Crunch

We have to point out, the main cryptocurrency is still down 80 percent since its all-time high close to $20,000 in December 2017.

XRP has overtaken Ethereum for the number two spot, as ETH flirts with dipping below $100, which we haven’t seen in quite some time. All to say that this is hurting the altcoins in its incredible ecosystem where global projects and blockchain developers are working to essentially change the world via a cryptoeconomics revolution.

Crypto Monopoly Skews Market Valuations

The first three digital assets amounts to a $97 Billion market cap, where the entire market cap of all crypto is just $121.5 Billion. That’s an 80% share of the entire cryptocurrency market but juts BTC, ETH and XRP. You know what this means? It means the rest of altcoins cannot show product market fit or have the momentum to truly succeed. That’s a concern of the crypto market I’m hearing the most about.

Bitcoin Cash have been fighting for supremacy, setting up competing products in Bitcoin ABC (Bitcoin Cash with new protocols) and Bitcoin Satoshi’s Vision (BSV) and ICOs in the 2nd half of 2018 have shown a steep decline. Changing market factors and increased regulation means Bitcoin must navigate the correction until the Bitcoin ETF gets passed and until Bakkt and Fidelity Digital Asset Services are up and running.

At these prices if you are an altcoin outside the top 50, good luck in maintaining relevance.

1

XRP

$14,229,192,616$0.352842$1,078,823,65240,327,341,704 XRP *3.25%

3

$11,185,076,267$108.13$2,192,108,980103,439,425 ETH-0.72%

4

$3,106,898,044$177.76$301,330,19417,478,463 BCH5.09%

5

EOS

$2,880,866,311$3.18$1,023,692,744906,245,118 EOS *-0.88%

6

$2,713,248,359$0.141684$116,231,20719,149,937,595 XLM *0.80%

I feel a Bitcoin ETF is not just possible but inevitable. Just as Brexit and slower growth is likely to hit us in 2019, the rise of digital assets could coincide with the next global recession. Just as the stock market is flirting with a bear market, so are digital assets.

The total market value of cryptocurrencies has effectively been corrected or shrunk to about $130 billion, compared with $800 billion last January. This is entirely related to Bitcoin’s price through, so we cannot say we live in a crypto era, simply that we live in an era where Bitcoin is a more marked digital asset. While Ethereum and XRP (Ripple) appear to have a use-case, they could be disrupted by other solutions eventually.

Bitcoin while not a safe-haven per se, is still the essentially and only digital asset that can be considered a form of digital gold. Many analysts believe the price of Bitcoin can easily go up again given the right market environment and signs from the market.

It is significant to say that this is no longer a crypto hangover but a Bitcoin winter. This is because this recent decline is entering the same league as Bitcoin’s 93% plunge in 2011 from its previous record high, and its 84 per cent rout from 2013 to 2015. However this is more like a correction that’s entering a temporary bear-market. Even December 2018 could show a different story, as history has shown late year rise of Bitcoin is the definitive trend.

There’s no shock to Bitcoin price drops, but it does depress the altcoin ecosystem and the visionary element of what a cryptoeconomic economy could mean to the future of so many industries. It’s that dip that hurts blockchian startups globally, especially those that haven’t been frugal with the funds they have managed to raise as ICOs pivot to crypto funds and more traditional VCs and even the advent of STOs.

Bitcoin’s abrupt decline coincides also with a slowing global economy where signs are that 2019 will be much worse than 2018 if not set in motion conditions for the next recession. Digital assets might become an increasingly attractive place for Millennials, as fewer and fewer are participating in the Wall Street (and other traditional stock exchanges) investing market that largely favors people who accumulated wealth well before 2008.

Each year digital assets are set to grow in their global impact, but the form they take and the innovation in the space is consolidating around a few winners. There’s no particular evidence that in current circumstances those winners include smaller tokens and blockchain startups that have no to little consumer opt-in and daily active developers. This could mean that the future of cryptoeconomics (CE) could largely be a world of ETH and BTC. At least until another public blockchain beats Ethereum to scalability with a ubiquitous and superior platform from an engineering perspective. This could easily be Dfinity, or Harmony Protocol, or Cardano, or Zilliqa, or any number of other 4th generation blockchains.

Basically quite a few factors need to take place for Bitcoin to have better days:

• Bitcoin ETF approval (circa April, 2019)
• More widespread Ethereum Future products
• A varied and flourishing Bakkt and Fidelity Digital Assets Services solution and marketplace of products (Circa February, 2019)
• More B2B opt-in and continued blockchain-as-a-service growth in the Cloud led by the likes of Microsoft, IBM, Alibaba and Amazon. (already happening)
• More clarity and global regulation around the successor of ICOs called STOs. (Mid 2019)
• More crypto funds and crypto hedge funds that focus on public blockchains and digital assets (which has occurred in 2018).
• Central banks creating centralized blockchain digital money for their fiat currencies. (mid 2020)

Most crypto articles only tell one side of the story but with Bitcoin’s impact on the world, it’s never quite so simple. Decentralization is happening and will evolve because of one main reason — younger consumers will champion it. There’s no stopping an evolution of our economic system towards cryptoeconomics and a more ethical emphasis on our technology companies which we are already seeing in 2018. All of these macro trends are deeply intertwined and Bitcoin is still the key driver of altcoin growth even if the projects are tethered to Ethereum, NEO, EOS, Stellar, Waves and other ecosystems.

The crypto purge of Bitcoin’s declining market price is actually good for the market in the long-term. It could get rid of the altcoins that are obsolete to the future cryptoeconomic system that will simply become a bigger and bigger influence each year post 2018.