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Why Cryptocurrencies Are Tanking (Except For Bitcoin)

By Alex NewmanCryptocurrencyFeb 23, 2018 12:48PM ET
www.investing.com/analysis/why-cryptocurrencies-are-tanking-except-for-bitcoin-200293672
Why Cryptocurrencies Are Tanking (Except For Bitcoin)
By Alex Newman   |  Feb 23, 2018 12:48PM ET
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Cryptocurrencies have once again gripped the news media’s attention, drawing global headlines thanks to the extensive volatility that seems to define their valuation. Increasingly, crypto-investors are beginning to give many fledgling virtual currencies the cold shoulder, and are starting to pay more attention to tried-and-tested favorites like Bitcoin.

Bitcoin keeps treading water


After Bitcoin’s disastrous performance in February earlier this year, many of its critics gloated that the king of virtual tokens had already had its day in the sun, and would soon be losing most of its valuation. Bitcoin bounced back quickly, however, once again flouting criticisms that it’s not a viable long-term investment, with its value nearly doubling from the year’s low recently.

Unfortunately, other fledgling cryptocurrencies haven’t been so lucky; many of Bitcoin’s competitors have weathered serious valuation losses, with coin exchanges erupting into panic that Bitcoin’s lesser peers like Ethereum and Litecoin aren’t long for this world. Bitcoin may still be bogged down by bad global press that seems to focus on the absurd heist that so regularly plague the virtual currency, but it’s largely remained immune from the long-term downturn that many lesser currencies have been suffering from lately.

What crypto-investors need to understand is that Bitcoin has been faring so well compared to many other cryptocurrencies because it’s fundamentally unique, and has a certain staying power that many of its competitors can only dream about. The primary driver of many altcoin valuations seems to be bets hedging on the fact that Bitcoin will be inevitably failing, meaning that when Bitcoin powers through its downturns and eventually gains back the valuation it losses in periodic plunges, the value of the altcoins whose fate relies on Bitcoin’s demise goes down.

Investors shouldn’t expect this to change anytime soon; while many of today’s leading altcoins are trying to separate themselves from Bitcoin and the image of cryptocurrencies its instilling in the minds of millions of global investors and onlookers, Bitcoin’s competitors are simply too small of fish to make distinct names for themselves in the broader markets. Sure, hardcore crypto-investors may be familiar with a myriad of altcoins, but the vast majority of the market appears infatuated with them only as a means towards hedging against Bitcoin’s collapse.

No confidence in altcoins


As long as many cryptocurrencies trying to compete with Bitcoin derive their valuation from investors flocking to them as an insurance policy against Bitcoin’s demise, buy investors looking to buy gold in Canada, you can expect those currencies to struggle as long as Bitcoin is still standing. The world’s crypto-king has shown it’s not going anywhere anytime soon, and its competition will suffer because of that for some time. Bitcoin is just fundamentally different, and altcoin backers need to understand that if they’re to make a profit off of less-than-mainstream virtual tokens. As long as Bitcoin avoids serious catastrophe, don’t expect other leading altcoins to enjoy permanent surges in valuation; despite an increase in competition, Bitcoin remains the primary driver of the market, and shouldn’t be expected to do more than temporarily falter in the coming months.

Why Cryptocurrencies Are Tanking (Except For Bitcoin)
 
Why Cryptocurrencies Are Tanking (Except For Bitcoin)

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