Bitcoin has long been considered the king of the cryptocurrency world. Up until recent months, there has been little discussion in the mainstream media about any particular Bitcoin alternative out in the markets..
Bitcoin receives the lion’s share of attention in the press. The media is full of stories about bitcoin multi-millionaires who acquired their fortunes after the coin went from being worth less than a US penny to over $1,000 in just over two years. However, if you are interested in cryptocurrency investing, you may also want to look at other options.
Decreased Dominance Supports a Bitcoin Alternative
If you are new to the world of cryptocurrency, you may ask, “What is Bitcoin dominance?” Think of it as Bitcoin’s “market share” of the overall cryptocurrency market.
On May 16, 2017, we saw Bitcoin dominance drop below 50%. This is the first time this has occurred in cryptocurrency history. Over the past several years, Bitcoin dominated 80-95% of the overall market. Since late April 2017, however, Bitcoin dominance has plummeted.
Factors Influencing Bitcoin Dominance
It is difficult to make a similar comparison to how Bitcoin dominance (or lack thereof) is playing out in the market. Even in industries with a strong leader, there are always usually 2-3 major competitors. For example, Netflix is synonymous with video streaming, yet Amazon and Hulu are just behind. Bitcoin’s 90% market share was as strong of a monopoly as you could find without some types of regulation constraint in place.
For those with a business or marketing background, we are currently watching the cryptocurrency market transform from a monopoly (only one contender, Bitcoin) into an oligarchy (a small group including Bitcoin and its alternatives).
What factors influenced the emergence of these Bitcoin alternatives?
- Concerns over the scalability of Bitcoin
- Slow Bitcoin transaction times
- New technology features on other coins (lightning network, improved privacy, etc.)
Whether you should be concerned about the long-term health of Bitcoin is a matter for debate. These flaws or shortcomings have inspired the development and adoption of new altcoins attempting to “do blockchain better.” Only time will tell how the Bitcoin community will respond to this challenge.
The Significance of Market Dominance
Why is Bitcoin’s dropping market dominance significant? It suggests legitimacy for these Bitcoin alternatives. Although several other coins have enjoyed their moments of fame, none of them had demonstrated the staying power to “compete” with Bitcoin in the cryptocurrency market. Now it appears that few prominent coins – at this moment, Ethereum and Ripple – are emerging to challenge Bitcoin as reliable investment alternatives.
What makes this even more incredible is the performance of Bitcoin. It would be one thing if these altcoins were taking advantage of a collapse in Bitcoin value. However, Bitcoin itself has grown from $1600 USD to over $2800 USD over the past couple months.
The relationship benefits both Bitcoin and Bitcoin alternatives. Rapidly growing altcoins have brought new money into the cryptocurrency market. Meanwhile, much of this money is bought and sold as Bitcoin, as it’s still a “gold standard” and most commonly supported with cryptocurrency exchanges and wallets.
Time to Invest in a Bitcoin Alternative
If you are looking to invest in the cryptocurrency market, it is certainly a time to consider different options outside of Bitcoin (although this doesn’t mean that you should rule out Bitcoin either). There are multiple options inside the “top 5” of cryptocurrency that seem like they will be around for a while.
With these new technologies and new money entering the market, the cryptocurrency market continues to be the “Wild Wild West.” We may very well see Bitcoin continue dropping in market dominance. How long until we see a new #1 coin in town?