Not the best of times have befallen the market of altcoins as the rate of even such resilient digital assets as Ether, ZCash, and Monero has crept downward. Meanwhile, Bitcoin has been less affected in recent weeks by the overall market decline, as the world's first cryptocurrency has maintained its position and has not fallen below $5,800. At the end of July, Bitcoin rose to $8,450. Such a striking difference from its colleagues could not but cause discussion in the crypto community. Thus, despite the negative forecasts, Bitcoin coped with a sharp decline in the cryptocurrency market. Questions about whether the fate of the dinosaurs, which suffered a quick and imminent death, is in store for the altcoins, or whether the reasoning about the impending disappearance of most of the coins is nothing more than unjustified speculation will all be discussed in the following article.
Death for the Altcoins, Life for Bitcoin?
On August 13, Xapo President Ted Rogers said in his Twitter that perhaps now the time has come, which is destined to destroy up to 90 percent of crypto assets. But the price of Bitcoin, which is at the level of $6,000, on the contrary, seems to be the perfect one for buying. "We could be in the midst of the extinction-level event for “crypto-assets” that many maximalists have predicted. 90 percent or more of CoinMarketCap listings will disappear eventually, and this extinction might as well happen now. Meantime, lower BTC price means incredible opportunity to buy more Bitcoin," Rogers wrote.
It is interesting that some analysts do not only predict the imminent death of all the altcoins but also point to the rather shaky positions of Bitcoin. In spite of the fact that Bitcoin is still a force to be reckoned with even in a bear market, the further deterioration of its position is being predicted." Parabolic moves are notoriously dangerous for short‐sellers. Usually, a top develops that often appears as a descending triangle over months, with reduced volatility and little [fanfare]," Jeff DeGraaf said in a note to clients Thursday. "Once the top is complete on the support violation, the security in question can often be considered permanently impaired or even 'game‐over.’ We are, of course, referencing Bitcoin as exhibit 'A' in today's market,” said DeGraaf, the well-known technical analyst of Wall Street.
In general, the tweet made by Rogers caused almost universal approval from other crypto enthusiasts. "I’m not a maximalist and I predicted the same thing!" said Civic CEO Vinny Lingham in his reply to Rogers.
The pessimistic forecasts for Bitcoin, however, are probably only shared by DeGraaf. The general mood of the community in relation to the crypto community is rather positive." The price is an imperfect means of measurement," as was explained by the founder of Athena Capital Meltem Demirors. "We've already seen a huge influx of investment caused by the fact that investors were just afraid of being late when the price of Bitcoin was heating up . . . and it was a speculative bubble. Now this bubble has burst and people are interested in creating real projects with realistic goals."
The Crypto Market in a Bubble
In general, the phenomenon of cryptocurrency price bubbles is not a new phenomenon in world markets, and they can be the reason for the appearance of such negative forecasts. "Why did such a forecast come about? The fact is that in any market at this stage of crisis, after a turbulent euphoria (as it was with the dotcoms, and so it was with the American stock market), a simple psychological thing is at work. People who are not involved in the market see the success of the company or the success of people and they themselves want to get into it without understanding what is really going on there, so they create some "crap,” launch it in the market, and this crap somehow achieves some success. Thus, we get a situation very similar to the situation at the end of 2017, when all the ICOs took off, even the ones who had nothing other than a poorly-written white paper. In the cryptocurrency market, as well as in any other market, this state of affairs is a portent of a bubble, as is the exponential growth in the number of standard assets. By 2000, there were a lot of IT startups, too, that did not have a product at all. The same thing happened in the crypto market in late 2017. This forecast appeared this week as a result of that. It seems that since a huge number of bad assets has grown, the crisis will wash all of them away," as Dmitry Karpilovsky, the founder of the CryptoNet professional community of crypto entrepreneurs, explained to DeCenter.
For example, the dotcom crisis killed 90 percent of these bad assets, leaving the good ones like Google, Amazon, and Apple. "Why is this not happening in the crypto market? Firstly, it has not happened in the stock markets. Yes, bad assets have left the market, but they vanished for economic reasons. In the stock markets, there are mechanics and processes that allow companies to disappear, as some companies were bought out, other companies went bankrupt, and others officially withdrew from the market. In the crypto market, however, with the way the market is structured now with a huge amount of utility tokens, and with a huge number of tokens from the "non-specific utilitarian application," they have nowhere to disappear. That is, their rate can fall into the abyss, they will cease to be necessary, but as such, they will not disappear anywhere, because their blockchains and technologies will not disappear. It is almost impossible to go bankrupt because the tokens practically do not have direct communication with any particular business, but even if they did, then usually, these companies have millions of dollars. Even if their founders do not do anything, they can exist for years. Therefore, 90 percent will probably not disappear. The assumption that people will lose interest in a large number of altcoins that do not have a real application and a real community is true. The focus of the investor's attention is very scattered, and the focus on the attention of users (these people are even fewer in number) is very scattered, and many companies do not show good traction at all. A huge number of altcoins have no development, which will not create a favorable impression among the members of the community. In general, such cases are very few. It is true that 90 percent of altcoins can lose their “loyal” followers very easily," Karpilovsky added.
Why Altcoins Will Not Disappear
If we talk about cryptocurrencies as a speculative investment instrument, then the trading volume of cryptocurrencies will greatly decrease in this case, and traders will simply move into better assets. "If we talk about the number of good companies, it is not 10 percent. At the moment, there are about 200 companies with good, stable indicators that have found a common language with their communities. Today, there are about 2,000 cryptocurrencies if you count them on CoinMarketCap. If you take large numbers, then yes, you can say that only 10 percent will survive, but this figure is even smaller now. Now there are 20 to 25 altcoins known to the general public. They are, as a rule, the most capitalized coins and those that are famous for some funny PR reasons. All the other coins are now generally unnecessary, as they are traded on second-rate exchanges and eke out a dubious existence.
Why does Ted Rogers think that 90 percent of altcoins will disappear? Well, because investors overestimate their expectations. They expect substance, not just beautiful words. Therefore, 90 percent of altcoins disappoint investors, and I absolutely agree with this. They do not need to disappear, but the love of investors for a coin is not based on principle. Only speculative interest is principal, next to the volume of trading and technology which is standing behind the coin. In addition, historically, when the ecosystem collapses, most startups die, but a year later, they double in number and new ones appear very quickly. Even if the altcoins start "dying out" by the hundreds, new ones will appear that will pick up this topic, since the focus of attention will be much less diffused as soon as the weeds fall off," Karpilovsky summed up.
Technology Defines Everything
Another factor that can play a significant role in the crucial issue of life and death for cryptocurrencies is the technology underlying this or that product. "In our opinion, the main thing for altcoins is to have a working and useful technology at its core. This is what can become a reliable "vaccine" against its disappearance. And this does not only relate to Bitcoin. Ether is quite a promising coin, despite the current fluctuations. Ripple also has a good technology and is already actively being used in banking operations. In general, the appearance of such a large number of cryptocurrencies is associated with nothing other than hype and fraudulent activities. Altcoins, in general, can be created in five minutes, as this is not a problem. The question is what will this altcoin support? You must discover the technology that lies at its basis," as was commented to DeCenter by the director and founder of trading-crypto.ru Alexei Bytev.
Fraud, and dishonest fulfillment of obligations, is yet another "nail" that the altcoins market is driving into the lid of its own coffin. "Indeed, only 10 percent, and maybe even a smaller number of cryptos, have something innovative at their basis giving impetus to the development of distributed systems, and, as a consequence, to all cryptocurrencies. More than 90 percent of the 2,000 to 3,000 existing altcoins do not have any exclusive technologies at all, as they are a tool for raising money from people who do not understand what and why they are investing in. These altcoins, of course, will eventually disappear, because people will sooner or later realize that they do not need a tool that does not have a unique technology. It is like a hammer with a plastic tip. Not with hard iron, but with plastic. The full disappearance of scam and near-scam altcoins will set in when people realize that nails can be driven only by iron hammers," added Bytev.
None Other Than Bitcoin
Concerning Bitcoin, crypto enthusiasts still show surprising unanimity for the most part by predicting a successful future for it. "We advise our regular customers to "buy up" Bitcoin now, while it is in a "drawdown,” and thus equalize their portfolios. Looking at the graph, it is easy to understand that now Bitcoin is on the lower lath of this year and has reached higher before. Now the price is at the level that is favorable for purchase. Further subsidence is possible, of course, but extremely unlikely, therefore, from an analytical point of view, it is now quite a good time to buy the world's first cryptocurrency," concluded Bytev.
It is not clear how exactly the market will react to the bubbles that have already appeared, but it is obvious that some of the altcoins will disappear, if not physically, then morally, for their users and financial investors. It is impossible to say for certain what exactly the percentage of altcoins is that will go extinct. When investing in this or that asset, it is worth paying attention to such factors as the technology that formed the basis of the new cryptocurrency, the community's reaction to it, the volatility (if there is already data about it), and how long it has already existed in the market. But it seems that so far, there remains one option in the form of Bitcoin for risk-averse investors.