Bitcoin squeezing out other cryptos as it zooms higher

The number of memes around financial assets – and their cryptozoological Frankenstein cousins – continues to mount as the world’s central bankers unleash as many acronymic “easing” programs they can to arrest the COVID economic depression. HODL was the classic one for Bitcoin, as it crushed under the weight of its first bubble in late 2017, with BRRRR the de jour version for 2020 money printing. There has been a combination in recent weeks as the cryptocurrency the central bankers love to hate has skyrocketed past its 2017 highs:

As low volatility begets high volatility, FOMO (fear of missing out) begets more historic new highs.

And a squeeze. The cult like HODLers are having a field day in schadenfreude as every man and his taxi driver piles in to Bitcoin. But at what cost to the other cryptos and possibly to the wafer thin confidence in its supply – the actual reason to consider it a more sound alternative to non-limit bound virtual paper currencies – is the question asked here:

….is bitcoin’s recent gain in market share due to the inevitable death of all those no-name/no-future coins that came to market during the recent ICO frenzy? Or is it due to defections from the other viable cryptos that might someday challenge bitcoin’s dominance?

bitcoin dominance bitcoin strangling other cryptos

 

 

 

 

 

 

 

 

 

During a week in which bitcoin had an epic run, the other well-known cryptos did okay. The oxygen may have been sucked out of the no-names with market caps approximating zero, but ethereum, litecoin and bitcoin cash all caught a bid. These charts actually paint a picture that resembles precious metals mining. Bitcoin is a Barrick or Newmont that just had a really good year, while the lesser cryptos look like mid-tier or junior miners being swept along in the sector whale’s wake.

Which means the crypto ecosystem might be evolving into a normal market, with big and small players and a common-sense dynamic in which a big player’s success sends money flowing down the food chain in search of juicier percentage gains.

With one difference: The supply of viable gold miners is constrained by geology. There’s just so much gold out there, and most of it has already been found. But the number of cryptos with algorithmically-constrained supplies is potentially infinite. And as money flows into that space, the incentive to create more bitcoin clones – and to sell bitcoin itself to buy those potential hundred-baggers – rises.

The supply of greater idiots ready to jump into the next latest thing is not that limited, until it is when everyone wants to sell. Crypto currencies don’t need to evolve into normal markets. They are normal market devices, run by humans with human emotions, just like CDO’s, CFD’s and other invented instruments. They’re all tulips ready to pluck themselves.

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Comments

  1. Top 4 countries with “bitcoin” search trend is nigeria, south africa, ghana and switzerland. No first prizes for guessing why and how those countries are related. Trading bitcoin feels filthy like one of those dodgy mining exploration companies that has a patch of dirt in the middle of nowhere and keeps bring out core samples they once did years ago showing they have, gold or copper or lithium or whatever is the latest rage.
    Anyway….. log charts are Interesting from a mathematics point of view. If it follows the current flattening, it appears that bitcoin will reach a plateau of around 40k after hitting peak around 140k.

  2. call me ArtieMEMBER

    Thanks Chris. I always enjoy when you take over the chair for a while (no need to tell DLS I said that)

  3. Two bits of news around the traps:

    FinCEN proposes new KYC rules for ‘non-hosted’ wallets

    The U.S. Financial Crimes Enforcement Network (FinCEN) has posted a proposal for new rules concerning “non-hosted” digital asset wallets. The proposal would require banks and money service providers to verify identities for, keep records on, and file reports on, transactions over US$3,000 involving such wallets not owned by another financial institution.

    Basically the big outcome is that under the proposed rules you would not be able to withdrawal crypto from an exchange to your own wallet, without that wallet first being KYC’d and ID’d as your own. Essentially this shouldn’t be too much different to the current situation where some exchanges allow you to have a white list of verified addresses that you can expediate your withdrawal process from.

    Essentially it is about creating a verified identity at the start of a BTC payment chain. If that coin is subsequently spent, and then further on spent in criminal activity, the onus will be on yourself to prove that your own onward spend was legal and for legitimate commerce.

    https://coingeek.com/fincen-proposes-new-kyc-rules-for-non-hosted-wallets/

    Tuvalu Embarks on World’s First National Digital Ledger and Infrastructure Project on Bitcoin SV

    Tuvalu is a Pacific Island nation with around 11,000 citizens that has just announced plans to become the world’s first paperless society using Bitcoin Satoshi Vision (BSV) and its digital public ledger. This will be a good proof of concept launch for digital currency.

    Not a great claim to fame other than the value that should be delivered as a proof of concept, as Tuvalu is notorious for having previously lost large amounts of money from its guano exports, and sadly has been subject to various scams and rip offs. Up until now its major source of income was licensing it’s television domain. Still it will be a good opportunity to see if the technology can live up to some of its claims.

    https://www.accesswire.com/621761/Tuvalu-Embarks-on-Worlds-First-National-Digital-Ledger-and-Infrastructure-Project-on-Bitcoin-SV

  4. Personal Risk ToleranceMEMBER

    In future, you may want to consider the difference between pure store of value crypto coins (Bitcoin, Litecoin, Bitcoin Cash), and smart contract systems (Ethereum, Cardano, Polkadot).

    The buyer demographics are significantly different. It’s like lumping Atari 2600 and IBM 8086 buyers in the same category when PC’s were new.

  5. I think bitcoin is a good idea. We can obviously see how it is with certain evolutions in other coins like Ethereum. Whether is it is a bubble or not is beside the fact that the decentralisation is something appealing. Robinhood investors are essentially running off the same FOMO it is just less contraversial because we are comfortable with the market they are doing it in. Unfortunately corruption is everywhere with value regardless if it may be easier sought in crypto. I think it is a good space to watch idealogically but ofcourse maybe not fundamentally just yet. However, if price action is your king then bitcoin has some lovely trend following dynamics.