With Bitcoin (BTC) recently showing bullish trends it's worth wondering if it's time to pull your investments out of your alts to put them back into bitcoin for if it should do another x10. Bitcoin is up 13.38% in the last 24 hours while many of the popular alt coins are rapidly declining in valuation/marketcap.
Cryptocurrencies are very volatile, they move a lot, be it up or down and they contain a lot of risk. Especially all these new cryptocurrencies, or as some people dub them - shitcoins. While with many of these coins it's quite obvious they are cashgrabs, trying to make a quick buck of the blockchain hype, there are quite a few questionable coins with ridiculous valuations. If we look at Cardano(ADA), it reached a marketcap of 33 billion dollars, while only still in it's baby shoes. I do admit it looks like a promising project and their Team is impressive, this valuation is completely outrageous. (It was valued as worth more than many companies; such a spacex, NetApp, Viacom,.. And so many more actual companies, which actually make (and sometimes lose) money throughout the year. These companies are worth as much as a virtual coin that is still mostly in development. It's hard to say isn't overvalued, which does not mean it won't be worth it's current value somewhere in the future, but if you ask me it wasn't worth the 33 billion a few days ago and it's not worth 22 billion right now. What we saw is that after the moon mission ADA did, it's price started to fall. Hard.
Now a possible (sadly I'm no omniscent creature so what I write is just what I think is a possibilty) explanation for that is that confidence in these alt coins is going down, lot's of them moon fast without being able to stay at their marketcap after the spike. Or people figure out these altcoins hold less value than they first thought and try to get rid of it. (something like this recently happened to TRON(TRX), it mooned first only to dip back down after investors started posing questions about TRONs validity on social media. This all happened over the span of two days, showing how volatility definitely works both ways.
Another phenomenon that could help explain the seemingly lowering trust in altcoins are pump and dumps/shills. While both have an enormous influence on price in the cryptocurrency world, both are quite different. Let's start off with pump and dump groups. I reently joined a pump and dump discord server to see what all the fuzz was about. It's basicly a pyramid scheme type of situation, where the higher you are ranked, the sooner you get the information about the pump. The differences are only second but second do matter in this game.
Of course the people running the pump know way ahead of everyone, so they likely just bulk up on their preferred coin of the day and dump it when the pump starts and the price skyrockets briefly. Of course I couldn't join a pump and dump group without actually witnessing their effect on a stock's price. The stock of the day was Komodo on binance, when the annouced time was reached one of the admins uploaded a picture of the pump and dump info.
When the target was met and the dumping began, the whole thing was over in less than 2 minutes. Leaving many member of the group with coins bought at an inflated price while the fast ones, the bots and the owners of the group were able to sell theirs at an inflated price. Practices like these show how easy it is to manipulate a price in this market.
*(note for anyone thinking about joining a pump and dump group: I wouldn't recommend it since you are basically competing against the other P&Ders, tons of which use bots or have a time advantage. But I'm just a guy on the internet so I can't stop you.)
The other one I wanted to talk about is shilling. this is basically when an individual (or group) tries to promote a cryptocurrency after buying it themselves. Of course everyone can see there is a huge conflict of interest here, yet when certain posts gain a lot of attention they can affect prices. This is logical in a market such as cryptocurrency. Where price is mainly decided by how much someone is willing to pay for it. So of course when a certain product is brought to the public eye, there is more demand and price rises.( However what we do see is that this upwards trajectory of a coin that is being "shilled" rarely lasts, and the price always has to correct a little.) Now we're in a situation where lots of good and bad coins are being promoted on various social media (just take a look at /biz/, it's shill central.) and for someone without technical knowledge it's hard to know which coin is good and which coin is bad. This in turn leads to distrust of alt coins and drives these people to buy the tried and tested: BitCoin, because it is still the biggest name in the game. So interestingly the shilling and trying to pump your alt coin might hurt alt coins in general.
However I think this trend of altcoins falling and longer standing coins remaining stable, while bitcoin rises is pretty undeniable, I don't think that I'm 100% right about everything I just said, so any feedback or other thoughts about my writing are very welcome!
I'm Casper, a 22 year old Belgian student applied economic sciences. I have recently taken an interest in crypto and do quite a bit of research. I don't claim to be an expert or a financial advisor.
I'm not a native English speaker so any advice/comments on my writing/grammar/typo's are very welcome!
All data and information was taken from coinmarketcap.com and investopedia.