Is Bitcoin Strangling The Other Cryptos? Part 2: The Little Guys Are Soaring
The idea that “bitcoin is its own asset class” and should therefore be judged based on its own highly-constrained supply rests on the assumption that the rest of cryptospace consists of “shitcoins” that will evaporate as bitcoin, with its first-mover advantage, network effects, etc., eats the rest of the currency world and becomes the one true reserve asset.
The following chart shows the 7-day moves of some of the no-names in the space. All are below $1 billion in market cap (though several hundred million is still real money, even in this hyperinflationary world), so they’re not yet serious contenders for much of anything, let alone reserve currency status.
But still, they’re rocking, and they’re not alone. Lots of other cryptos, including relative heavyweights like ethereum (near its all-time high), are outgaining bitcoin on a percentage basis.
So what does this mean? Who knows at this point, but some possibilities are:
1) We’re witnessing a replay of the 1990s tech stock bubble when a handful of future giants like Amazon and Microsoft soared – but dozens of tiny newcomers like Pets.com soared even more — leading many to think that the dot-com mania was broad-based when it was actually pretty narrow, as the subsequent carnage proved. Amazon and Microsoft went on to rule the world while hundreds of pointless start-ups died inglorious deaths. If so, bitcoin is obviously the Amazon in this story.
2) Cryptospace is expanding like a supernova as hundreds of small coins gain traction to usher in a world of competitive currencies with chaotic but fascinating implications for a global monetary system that looks increasingly like a 1950s car, big and solid but way too cumbersome to survive in the modern world.
3) The success of hundreds of other cryptos makes the “supply” issue extremely problematic for the bitcoin-is-money crowd. If all these new coins come to market and succeed (please refer back to the serious market caps in the above table) then the “money supply” in the crypto space has to include them. In which case the potential supply is infinite, and the “intrinsic value” of any given crypto is hard to calculate, let alone trust.
Which of these three, if any, is right? Who knows? Fascinating times!
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