The market for alternative cryptocurrencies is on life support this weekend after crashing to six-month lows on Thursday, the casualty of a sudden correction in the price of bitcoin (BTC).
Altcoins have since recovered from their lows but remain at the precipice of another violent drop – a move that could usher in a new ‘crypto winter’ with devastating consequences.
The combined altcoin capitalization fell to $66.1 billion on Thursday, the lowest since March, according to CoinMarketCap. By Saturday, the combined market cap was worth just over $70.6 billion.
As a comparison, altcoins were worth a combined $89.9 billion on Sept. 18. During the summer, the market peaked around $143 billion.
Most of the majors had reported 24-hour gains Saturday, with Ethereum (ETH) rallying 3.7% to $174.13.
XRP’s price advanced 1.2% to $0.2242.
Bitcoin cash (BCH) climbed 4.9% to $229.27.
Bitcoin, whose market dominance has declined slightly over the past week, was up 1.3% at $8,188.91.
2019 has been a wild year for altcoins. After a prolonged accumulation phase, market leaders Litecoin (LTC) and Binance Coin (BNB) sparked a major breakout for the majors. After all, it was LTC, not BTC, that led the bull charge all the way back in February. Although bitcoin quickly took the reigns, alternative assets continued to shine through the spring and early summer.
The market began to cool in July amid signs of bullish exhaustion. At the time, bitcoin had traded as high as $13,900 and was an even bigger share of the cryptocurrency market. A series of lower highs led to a monthslong consolidation around $10,000, which opened the door to the now infamous descending triangle. Once the lower confines of that triangle were breached, the cryptocurrency dumped more than $2,000.
Since mid-summer, altcoins have demonstrated little utility outside of reflecting bitcoin’s trajectory. When BTC falls, so do alts. When ‘king crypto’ rallies, so does the rest of the market.
If altcoins were truly becoming their own marketplace, they would exhibit more price independence. That’s exactly what we saw during the height of crypto euphoria back in early 2018 when alts represented roughly 70% of the crypto space. Since then, their share of invested capital has dwindled significantly.
The Ethereum-to-bitcoin exchange rate indicates that the death of altcoins could be nigh. The pivotal cross has declined around 44% this year and is way below levels that reflect healthy demand for ether and the rest of the altcoin class.
It’s still too early to rule out every major cryptocurrency, but the once promising sector is heading in the wrong direction. The future will either be one of bitcoin maximalism or competition among several well-capitalized blockchains. The tokenization of fiat money could permanently alter the landscape in a way that benefits bitcoin as the only legitimate alternative to central-bank currency.
Last modified: January 10, 2020 2:49 PM UTC