The FED released a report on why the price of bitcoin keeps going down, and one of their findings was quite interesting.
According to the St. Louis Federal Reserve, the proliferation of altcoins has been one of primary depressors on bitcoin's price.
Specifically, they had this to say:
“While Bitcoin's price is not likely to fall to zero, the prospect of a flood of Altcoin competing with Bitcoin in the wealth portfolios of investors is likely to place significant downward pressure on the purchasing power of all cryptocurrencies, including Bitcoin.”
Why do they think this exactly?
According to the report, there is basically a finite amount of money that is interested in investing in bitcoin and cryptocurrencies.
In their view, if these other altcoins did not exist, much of that money would likely find its way into bitcoin, giving it a higher price than it has currently.
Therefore, instead of bitcoin being worth about $120 billion currently (the total crytpo market cap), it finds itself worth about $60 billion.
As we can see, bitcoin has been slowly losing its stranglehold over market share as altcoins have been proliferating:
According to the FED, if the creation of altcoins continues at its current rate, then the price of bitcoin will be severely limited compared to what it might be worth if they did not exist.
Which, when you think about it, makes a lot of sense.
Not quite the whole story?
Sometimes altcoins bring investors into the market.
There is an argument to be made that as these altcoins fill nitches that bring new users and investors into the market, then these new users likely also venture into bitcoin.
They may have never have ventured into bitcoin at all if that particular altcoin never got them into the market in the first place.
So, while I mostly agree with their findings overall as it relates to altcoins and bitcoin's price, I don't believe it tells the entire story.
Stay informed my friends.
