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Altcoins are any cryptocurrencies that are Bitcoin alternatives. There are over 5000 altcoins in different markets today. Each coin claims to have something that makes it different from the rest, be it faster transaction speeds to different use cases. While Bitcoin holds the lion’s share of the cryptocurrency market cap at 61%, there are others like Ethereum that are not doing so badly. Ethereum has a 12.3% market share. In 2021, Bitcoin crossed above the $50,000 mark. More investors and big-name companies are showing interest in Bitcoin. Where does that leave altcoins though?
The increased interest in cryptocurrencies bodes well for many altcoins. While it may be difficult to predict how all altcoins will perform individually, one could safely predict that altcoins may have a bullish trend year.
Reasons Altcoins may have one bullish trend year
There are many reasons one can safely conclude that Altcoins will have a bullish year. Here are five;
1. It’s in line with previous trends
It has been observed in the past that a bullish market for Bitcoin led to a bullish market for some altcoins. For example, in 2014, the price of Litecoin hit highs of $50 when the price of Bitcoin rallied. Similarly, in February 2021, Ethereum hit a record high around the time that Bitcoin was rallying too. While a Bitcoin rally hasn’t always predicted a rally in some altcoins all the time, it is safe to assume that the continuing bitcoin rally could positively affect some altcoins
2. Increase exposure of cryptocurrencies
For many years, people and organizations have stayed away from cryptocurrencies in general. The messages given by governments and financial institutions have been mixed, with some predicting that they are scams that will end in massive losses and others predicting that they could change the future of currencies forever. At the moment, those who trusted in cryptocurrencies like bitcoin when they were worth very little are smiling all the way to the bank.
This exposure means more people, particularly those who cannot afford to enter the Bitcoin market at its current prices, will deep-dive into finding the next ‘Bitcoin.’ If many people settle on particular altcoins and start purchasing and trading them, the increase in demand will lead to an increase in price. In short, if people purchase altcoins hoping to get similar results to those of Bitcoin, the altcoin market is sure to rally.
3. Increased use cases
All cryptocurrencies are not created equal. While there have been many cases of cryptocurrency scams, there are many genuine altcoins with very specific and lucrative use cases. Take the example of Ripple, which aims to work with financial institutions to facilitate international money transfers. Such cryptocurrencies, if they prove useful and if they gain traction, could increase in value with time, which bodes well for the altcoins bullish trend year prediction.
4. Creation and gaining popularity of crypto indices
S&P Dow Jones Indices has plans to launch crypto indices in 2021. There are already some crypto indices in place that help interested investors to diversify their portfolios while simultaneously investing in multiple cryptocurrencies at the same time. According to the law of supply and demand, increased demand for altcoins will lead to higher values.
5. Improved altcoins
One thing that predicts altcoins bullish year is the fact that some altcoin companies are working hard to improve their products offer. Look at Ethereum as an example. The network launched an upgrade named Ethereum 2.0 that is meant to help the company and the coin be bigger. Bitcoin is the current gold standard for cryptocurrencies, but with improvements to altcoins to even the playing field, the future of altcoins looks brighter.
3 reasons an altcoin bullish year may not compare to a Bitcoin bullish year
Bitcoin growth between March last year and March of this year shows an over 400% increase in price. While altcoins may experience a bullish year, there are a few factors that stand in the way of seeing similar rates.
1. Bitcoin monopoly
Even though many of these altcoins have different use cases from bitcoin, it still has a mammoth share of the market. Since most investors are setting their eyes on Bitcoin as the main investment choice, it may be hard for the other altcoins to compete at its level.
2. Scams
Altcoins often make steps forwards in creating a name for themselves and steps backward because of fraudulent scammers who create fake cryptocurrencies to steal from people. An example of a fake cryptocurrency was DeTrade. Besides that, there are many scams surrounding bitcoin and other cryptocurrencies aimed at stealing from people. Such negative publicity does not bode well for cryptocurrencies in general, but they are particularly harmful to the reputation of altcoins which are yet to build a name for themselves and establish their utility.
3. Liquidity
One reason why many people invest in Bitcoin over other cryptocurrencies is the fact that it is very liquid. That cannot be said about many altcoins. People want to invest in something that they can easily get out of. This lack of liquidity does not bode well and may stand in the way of an altcoin’s bullish year trend.
Conclusions
A few years ago, talking about investing in cryptocurrencies was something novel. Now, there are more cryptocurrencies than one cares to explore. These altcoins have different use cases and sometimes run on entirely different systems from bitcoin. The increased popularity of bitcoin generally spells good news for altcoins. The key problem may be identifying which altcoins will experience a bullish year and which ones will fade out of existence. Depending on how these different altcoins play their cards, they could easily ride a bullish trend inspired by bitcoin.