Altcoins
Bitcoin and Altcoins: Are There Two Crypto Bubbles?
As digital currencies have exploded, reaching a total value of over $700 billion this week alone, prominent voices have been heard on both sides of the coin. Investors have rushed into the market to take advantage of the rapid gains of Bitcoin, Ethereum, Ripple, and other virtual currencies, but at the same time, some of the biggest names in finance have bashed the cryptocurrency space, calling it a bubble or worse.
In a recent interview with Coin counterErik Voorhees, CEO of ShapeShift and a long-time proponent of digital currencies, admits that he believes the digital currency industry is susceptible to the bubble phenomenon. However, while there has been much talk in recent months about the digital currency bubble, he goes further than that; Voorhees suggests that there are actually two different bubbles forming at this point.
A Tale of Two Bubbles: Bitcoin and Altcoins
According to Voorhees, “Bitcoin is more relevant than ever, but along with it, a number of other digital assets have grown.” Among the most prominent of these other digital assets are the so-called altcoinsone of the many alternative digital currencies that are inspired in some way by Bitcoin and in most cases claim to be better than Bitcoin in some way.
Voorhees cites Ethereum, suggesting that ether “has had a much bigger run this year than bitcoin, and yet bitcoin has more transactions, more users, more market cap than it’s ever had before.”
On the one hand, this is all good news for the cryptocurrency industry. “I think it proves what I’ve been saying for a long time, which is that crypto assets are not mutually exclusive,” Voorhees said. “They don’t just grow by competing with each other. The whole industry grows by competing with traditional finance.”
On the other hand, and perhaps because “the average person simply holds it as a speculative “investment,” and because “no one, no company, and no group of people can control” the world of cryptocurrencies, Voorhees believes we are in a number of bubbles.
He’s seen bubble behavior “in altcoins since the rise of ethereum and in bitcoin this fall. Both are still in their bubble phase, and I don’t know how far the bubble will go or how far it will collapse. But they’re definitely in bubbles.”
Voorhees added: “I think bitcoin is going to trade lower than it is today in 2018. But I’ve seen a number of bubbles like this before. There will be more. And in the long run, if this thing takes over the world, the best strategy is to just buy it and hold it. But anybody who buys it thinking the price is going to go up immediately and they’re going to cash out and make a lot of money is probably going to suffer.”
Double bubble problem?
What could it mean if there were two bubbles instead of one larger digital currency bubble? Perhaps these bubbles would burst differently and at different times? It is notoriously difficult to predict the evolution of digital currencies, and it is not necessarily true that a Bitcoin bubble would burst at the same time as an altcoin bubble.
Investing in cryptocurrencies and others Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article does not constitute a recommendation by Investopedia or the author to invest in cryptocurrencies or other ICOs. As each individual’s situation is unique, a qualified professional should always be consulted before making any financial decision. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date of this writing, the author holds cryptocurrencies.