Ethereum’s Effect on Altcoins Feeds Bitcoin’s Dominance
Bitcoin’s 12% sudden rise as China’s President Xi Jinping triggered a blockchain frenzy cemented its grip on the market and strengthened its dominance of the entire crypto industry – at its highest range in almost three years (currently at over 67%). The sustained dominance tells of Ethereum’s shortcoming which helped launch, and still hosts, many blockchain projects whose native assets have since risen and fallen in value over some three years.
Ethereum was particularly instrumental in bringing about the 2017 alternative currencies (altcoins) season. But the smart contract platform could not be said to hold the same sway today. Not as an average altcoin investor is now at a loss of between 80% to 90% or more with some having lost their invested capital completely as the projects they backed have folded up.
The prolonged bearish market since 2017 brought about such a poor performance that has created doubts in new users, keeping money away from coming in regardless of whether the project they wish to back is on track to achieve its set goals or not. Confidence in altcoin-issuing projects has been hurt and interest discouraged leading to a gradual dwindling of altcoins’ value and giving rise to a much different environment today.
Ethereum 2.0’s release is to rejuvenate the industry but the opposition to such a rise is strong especially as attention is on Bitcoin now which just picked up after it suffered a dump as the CME futures expired. More institutions and governments have showed interest in the top cryptocurrency in the last year discussing regulation, introducing their currencies and encouraging institutional investment through platforms like Bakkt which now beams hope despite a poor start to its operation. From Bakkt to Lightning Network improvement, the Bitcoin angle looks more interesting than investing in altcoins at the moment.
Also, the criticism of Ethereum has been mounting. The latest from the computer scientist and cryptographer known for his pioneering role in the creation of blockchain-based contracts recently took a swipe at the Ethereum platform and its leadership saying they are devolving into “centralized cult”.
Szabo, who has a unit of the currency named after him, said he “was emotionally attached to Ethereum, for silly egotistical reasons” but has since had a rethink. Responding to a question on which smart contract he would recommend if Ethereum is not a choice, he tweets: “They are all flawed, but I would choose either ETC or RSK long before I’d choose ETH. I don’t think any of them are ready for serious financial applications though, alas, and the ones running on ETH, beyond perhaps simple tokens, are likely at high risk.”
Few are obviously evil so it takes outsiders time to recognize, but now I can't deny the evidence: claiming immutability & censorship resistance on the one hand, attacking trust minimization principles on the other, claiming decentralization while devolving into centralized cult. https://t.co/KxOn4ZRb5R
— Nick Szabo 🔑 (@NickSzabo4) October 15, 2019
Ethereum’s effect on blockchain projects could also be a factor for STOs poor market adoption so far particularly as no exchanges are trading their tokens though they are expected to continue on a gradual upwards trend. IEOs are still better but dying off in trend too.
By December 9, Bakkt will launch the first regulated options contract for Bitcoin futures. If new institutional and retail customers are onboarded based on interest, Bitcoin may gain more strength to tighten its grip on the market and squeeze altcoins the more. While this will present a great altcoin buying opportunity for new investors, it will also sound a warning that the crypto industry has evolved beyond the 2017 stage when a whitepaper is enough to win over interest and investment.
As Bitcoin’s rising dominance of the crypto market is becoming a cause for concern for many altcoins, there is no guarantee that a slowing market will rebound soon as it has done in the past. Blockchain projects need to ensure the utility of their tokens and build a strong community to make a difference so their projects would be seen as alive to attract the attention of investors.