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Wednesday, November 25, 2020

Bitcoin and gold versus Chainlink and the market’s alts

What’s the motivation behind purchasing an altcoin? For some, a specific altcoin is an entry into a different facet of the larger cryptocurrency space. While some offer exchange-related on and off-ramps, most altcoin buyers look to these coins with small market caps simply because they can double or even triple within a few days. This ability to balloon and burst is the fundamental difference between Bitcoin and the lesser-known altcoins, and this difference has been growing over the past few months.

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Since Bitcoin began steadily rising towards the end of July, naturally, so have its purchases, with investors wanting to get in on the 2020 bull run. But, is this the only reason investors are taking to Bitcoin, or do they look to the king coin as a lure of safety in a market where volatile altcoins are rife? With respect to the larger market, how do Bitcoin and altcoin buys compare to more popular investment assets like gold and equities?

Speaking to AMBCrypto, Michelle O’Connor, VP of Marketing and Community of Uphold, said that users on the retail investment platform are buying a mix of assets, including equities, commodities, and Bitcoin and altcoins. On the equities side, Tesla and JP Morgan are all the rage, while gold is still hot despite its August drop from its all-time high, adding that on the crypto-side, it’s a mix of the usual and the new.

Bitcoin is still popular from a retail point of view, with its price on a 52 percent incline, but smaller altcoins like Chainlink and DigiByte are getting in on the action. O’Connor said,

“The most popular assets actually are spread across a wide range from Universal Gold (traditional safe haven asset) to Popular US equities like Tesla, JP Morgan all the way to Bitcoin, Link and DGB. “

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One can understand the interest in Chainlink, with the now 5th largest cryptocurrency in the market surging from under $2 in March to over $19 last month, before dropping down to $13.06, at press time. In fact, LINK got much fanfare from Dave Portnoy, the founder of Barstool Sports, as he got into the Chainlink market, in addition to the BTC markets courtesy of the Winklevoss twins.

Further, DigiByte, since the March drop, has surged from $0.0033 to $0.037, before dropping down to $0.024. Compared to the 39 percent drop in LINK and the 35 percent in DGB from their yearly highs, Bitcoin has only fallen by 12 percent, with the cryptocurrency continuing to attempt recovery, at the time of writing.

Add to this the two altcoins’ combined market capitalization is less than 2.5 percent that of Bitcoin’s, and you have a more level headed market in Bitcoin than you do in the altcoins, then why is it that all three cryptocurrencies are seeing over 140 percent trading on a month-on-month basis?

Well, one theory could be the fact that Bitcoin is closer to gold in its investment importance than to altcoins like LINK and DGB. Retail investors are likely dividing their portfolio into speculative assets, the kind that holds bags of LINK, DGB, and other altcoins, and safe-haven assets, the kind that holds larger market cap assets like traditional gold and Bitcoin.

This theory would posit that investors are looking at Bitcoin as the safety within and outside of the cryptocurrency space, in a space occupied by more traditional assets like commodities and equities. Hence, crypto-specific retail traders are trading in one of three ways, speculative [altcoins only], conservatives [Bitcoin only], and mixed [altcoins and Bitcoin], even more so now than ever before.

Another interesting point from O’Connor’s statement is the lack of more established altcoins like ETH, and XRP, both of which have seen strong price swings over the past few months, particularly the former. Taking the top coins and the surging altcoins and forming a portfolio out of them seems to be the new trend. Even if this trend seems poorly structured, it is still indicative of the fact that Bitcoin, both in actual price movement and in expected price movements, is holding strong.

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