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How Much Does Bitcoin Influence Altcoins?

by Pragati Shrivastava

Crypto winter has officially ended and Bitcoin had some exciting gains last week, which is a good indication that cryptocurrency is waking up from its hibernation, but there are several predictions on where the digital asset might go as the 2020 Bitcoin halving event approaches and even more people are wondering exactly how much the Bitcoin market fluctuations effect every altcoin on the market.

Bitcoin expert Tone Vays, spoke on the current state of Bitcoin and his thoughts on the future of the digital asset. He, like many other trade experts, have been calling for a descending triangle breakdown – and here we are again. The last time we saw this resulted in Bitcoin completing an 85% retracement of the parabolic advance into the low $3,000s. A similar breakdown this time around could see value dropped back to around the $5,000 mark, which isn’t too far from the triangle breakdown target.

On this Tone Vays says, “ I think we are headed for the low $7,000 area but, if that area cannot reverse the price quickly and we consolidate there the way we are now doing in the low $8,000s then $5,000 becomes a reasonable and likely target.”

Speaking of Bitcoin’s rally and price targets, there is chatter about how worthless Ethereum and other altcoins are – undoubtedly from the Bitcoin purists, because despite Bitcoin’s dominance at nearly 70%, Ethereum still takes up another 20%. To this, Vays believes “ Once people fully realize how useless and unstable that project is, a mass exit out of Ether can actually drive Bitcoin very high due to Bitcoin’s low liquidity to handle a run on the Ethereum bank.” I guess we don’t need to tell you how he feels about altcoins.

According to Coin Market Cap there are currently over 3,000 cryptocurrencies with the number of new cryptocurrencies steadily increasing over the last three years, and no indication that the development and enthusiasm for digital assets is decreasing. Indeed, there is a cryptocurrency for almost everything from the Russian WhopperCoin to the Ethereum Useless token, Doge coin, and Trump coin.

Remember that the initial value proposition of altcoins was the ability to do things that Bitcoin can not do – or at least couldn’t do well. Most of these altcoins forked from Bitcoin to help solve the problems of speed and scalability, with many ambitious projects out to raise significant sums of money.

Of course, in order to raise money, altcoins launched Initial Coin Offerings (ICO); many were scams, but there was an altcoin that broke fundraising records and continues to be an exciting blockchain project: EOS. Of course, every altcoin has their purpose and they expect to deliver their products or services, funded by the money raised, but different altcoins have different value propositions and depending on the type of developments you’re interested in investing in like number of transactions, saving on transaction cost and fees, privacy and protocol issues, etc.

Following the line of reasoning, it is quite possible to argue that altcoins exist to solve Bitcoin’s functionalities issues and weaknesses that prevent it from truly going mainstream as a cryptocurrency, but may stay as a valuable commodity for investors and traders.

Why? Because Bitcoin’s script is not flexible. The number of mined token is finite. The time to find blocks will always remain around 10 minutes, etc. There is an assertion that Bitcoin lacks features, but this is only true if we look at it as a static network. On the plus side, there is a vibrant community of developers who are working on solutions to its issues. So while Ethereum may have superior features compared to Bitcoin, it exists and thrives because hundreds of projects have been developed using its protocol.

Is there any doubt that Bitcoin is king? Many consider it to be the “gold standard” of cryptocurrency and it really is the grandfather of all digital assets. But we’re left to speculate the volatility of all cryptocurrencies. Certainly the market indicates where Bitcoin goes, altcoins follow. Is there a breakout coin that goes its own way? Is Ethereum, while second by market capitalization, independent enough to break from Bitcoin’s coattails? What about the altcoins.

And here’s a question to mull over: If Bitcoin is second to none in security and could overcome its issues with transaction speed and scalability, would those secondary altcoins have meaning enough to exist or compete in the market?

Sure, there are some altcoin and blockchain projects that exist because they do serve a purpose. Tokens like BAT, with the Brave browser, or BNB coins for use on the Binance exchange have value, but for investors, they still seem tethered to Bitcoin’s market volatility and that’s a pretty good indicator of where I’d put my money for the long haul.

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1 comment

Wendy Blankers November 1, 2019 - 2:48 pm


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