Ever since 2008, Bitcoin has been enjoying a prime position in the cryptocurrency market. Its market share was also the highest in the initial years. But with the release of altcoins, i.e., cryptocurrencies other than Bitcoin, the popular crypto coin Bitcoin has started to lose ground. Last calendar year, investors saw many utility-oriented and innovative digital coins taking over Bitcoin in terms of popularity and demand. In fact, as of January 14, Bitcoin price market share was reported at a mere 39%, which was approximately 70% around the same time last year. This severe dip didn’t go well with many investors and even resulted in negative trends in terms of price.
During this time, many investors who were holding Bitcoin for long decided to let go of their Bitcoin holdings by selling it off and converting it into BTC to INR. As an investor, you must be quite wondering how the single largest cryptocurrency is losing to relatively new altcoins. Well, we have the precise answer to your question. To help investors like you stay up-to-date with the latest happenings in the crypto space, we have curated an ultimate guide listing all the reasons that are making altcoins the ultimate king in the present scenario. So let’s head straight to the reasons shared below.
Cryptocurrencies Use Cases are Expanding
A quick look at some of the altcoins launched post-2018 will show you how many altcoins are, not just cryptocurrencies. Their advanced technology can be used by businesses in different sectors or industries to solve real-world problems. These blockchain-based platforms are no longer restricted to just peer-to-peer financial transactions but have expanded into automation, easy access to credit, building greater trust around financial transactions, and more.
Besides opening a whole new world of possibilities based on blockchain technology, the concept is now being adopted by many on a larger scale. The entire cryptocurrency market is now leaning towards different crypto options that have different yet meaningful and relevant value drivers, like smart contracts, play-to-earn games, Non Fungible Tokens (NFTs), distributed storage platforms, Decentralized Finance (Defi), and much more.
All these varied and innovative applications are fundamental for giving rise to newer and better ways for businesses and consumers to manage operations and interact with one another digitally.
Institutional Investors are Tilting towards Altcoins
Surprisingly, digital assets are now gaining more momentum and importance in the eyes of institutional investors. It is why their focus has shifted from “should we invest in crypto” to “which crypto should we invest in.” This drastic shift has resulted in colossal money pouring into the cryptocurrency market, especially altcoins. Institutional investors have a high-risk appetite and more money than any retail investor, giving them the ability to invest heavily in speculative assets.
Following a similar trend, even retail investors have now started investing in altcoins than Bitcoin. As the cryptocurrency market is gaining wider acceptance, institutional investors are now forced to acknowledge blockchain’s value across different industries. As this trend continues and is expected to continue in the coming years, you can expect altcoins to benefit significantly from it. You can also expect it to be one of the biggest paradigm shifts in the cryptocurrency space over the coming decade.
The Fundamentals are Now Changing
The crypto space currently has around 16,000 cryptocurrencies, and most have their own protocol or set of rules. You can also consider them as the basic fundamentals on which each cryptocurrency works. When it comes to Bitcoin, it allows all users to trade Bitcoins with the aid of digitally signed and encrypted messages. But since altcoins are in thousands, you will have to check what protocol each follows. For the sake of convenience, check only those altcoins that consistently make it to the list of top ten cryptocurrencies every year.
Now that you understand what fundamentals or protocols we’re talking about, remember that the valuation of cryptocurrencies is directly dependent on the number of people and volume of activity on any given protocol. It implies that the more the activity and users on a given cryptocurrency’s protocol, the more valuable it will be. Cryptocurrencies are now in the midst of crossing the chasm, wherein only highly relevant cryptos will survive in the overly competitive market.
Investors have now started to consider the cryptocurrency’s actual usage, their USPs, underlying token economic models, and more before putting their hard-earned money in any digital asset. This, too, has led to the rapid growth and popularity of several altcoins.
Altcoins are Not That Expensive
Another reason behind the growing popularity of altcoins is their prices. Since they cost much less than Bitcoin, many retail investors find it easy to enter the market by investing in altcoins. You can easily find a list of cryptocurrencies that are trading for far lesser than what they really should owing to their utility, and there are chances they may pick up pace real soon.
If you check Bitcoin’s price as of Jan 14th, it was traded for as high as $43,000. It has also reached the $60,000 mark in the past years. But you will never see an altcoin reaching this price in trading value. However, it doesn’t mean that lower-priced altcoins don’t provide spectacular returns.
A prime reason why many people are opting for altcoin investment is, the upside of cheap investment is way higher than the downside risk of reaching zero. Altcoins have been providing an easy entry point and an opportunity to earn great profits for asymmetric risk. Hence, you are seeing the focus slowly being shifted to altcoin, and it will only amplify going forward.
Altcoins are Known for Constantly Upgrading & Innovating for the Best
If you’re seeing altcoins gaining momentum, it is because they are taking advantage of Bitcoin’s shortcomings. Ripple (XRP), for example, mines its coins in a scalable, simpler, and easier way than Bitcoin. Ethereum, on the other hand, offers multiple functionalities in the underlying blockchain infrastructure like automation.
Solana is another altcoin that has the potential to surpass or reach closer to Bitcoin because it was mainly created with the sole aim to offer a scalable, affordable, and more secure platform similar to Ethereum at a comparatively lower cost than Ethereum and Bitcoin. All these have together led to the growing popularity of altcoins, making people leave Bitcoin for utility-driven and innovative altcoins, like Cardano, Ripple, Ethereum, Solana, Polkadot, Tether, Avalanche, Decentraland, and more.
What Next?
The reasons shared above might be enough to indicate that the season of altcoin is coming soon, and it will be here to stay. Although Bitcoin has a strong use case, there are plenty of new altcoins in the market with advanced, better, and way more use cases than that offered by Bitcoin. So if you were depending entirely on Bitcoin till today, it’s time you reconsider your investment strategy and diversify your portfolio for the best returns.
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