Altcoins vs Bitcoin – Which cryptocurrency will survive the market crash?

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Altcoins vs Bitcoin – Which cryptocurrency will survive the market crash?

One of the greatest advancements in the financial sector during the past decade is the emergence and rise of cryptocurrencies. The age of cryptocurrencies was kicked off by Bitcoin, which is why the term Bitcoin became synonymous with cryptocurrency. Soon afterwards, what followed was the development of thousands of altcoins.  

However, traders and investors tend to be quite anxious about a potential market crash in the cryptocurrency ecosystem that might wipe out cryptos’ value. This article will focus on which cryptocurrency will survive a market crash, and why.  

Altcoins vs Bitcoin

Before we delve into the potential crypto crash, let’s first go through the differences between altcoins and bitcoin.  

Altcoin is a fusion of two words, alternative and coin. In their basic form, altcoins are all other cryptocurrencies apart from Bitcoin – they are the alternative to Bitcoin. Altcoins can then be further grouped into stablecoins, utility tokens, security tokens, or mining-based cryptocurrencies. 

  • Security tokens 

These are altcoins that are typically issued in an initial coin offering (ICO). Security tokens are traded like stocks or bonds since they offer pay-out such as dividends or shareholding in a business venture. Since security tokens are cryptos representing real assets, they are subjected to security regulation laws – Siacoin and Tron (TRX) are examples of security tokens.  

  • Stablecoins 

The objective of these cryptos is to eliminate the volatility inherent in other cryptos – the value of stablecoins is pegged on other assets. Stablecoins are classified into crypto-collateralised coins, fiat-collateralised, and non-collateralised stable coins. For the non-collateralised stablecoins, algorithms are used to determine their value. The most popular stablecoin is Tether (USDT), which is backed by USD. 

  • Mining-Based Altcoins  

These altcoins are the most similar to Bitcoin since they have the same mining process as Bitcoin. Most top altcoins are mining-based; this includes ETH, Dogecoin, Litecoin, Ripple (XRP), and Cardano (ADA). 

  • Utility Tokens 

Utility tokens are issued via ICOs similar to security tokens. The utility tokens are cryptos that give holders the right to access a company’s product or services. Investors holding these tokens can easily access special deals from a company, which otherwise would have been expensive or inaccessible to them. An example of a utility token is ERC20. Unlike security tokens, utility tokens are not subjected to rigorous securities laws and regulations.  

The History of Bitcoin and Altcoins 

Bitcoin was developed in 2008. Since it started trading in August 2011, the price of BTC has increased from $8 to highs of $42,000 in January 2021. This represents an increase of over 500,000% in under ten years. 

One of the most notable and earliest altcoins to be created was Litecoin (LTC), in October 2011. LTC was regarded as the “silver to Bitcoin’s gold.” Like most altcoins after BTC, LTC has a similar code and functionality as Bitcoin. Since it started being traded, the price of LTC has only increased by about 9300% to date. Another notable altcoin is Ethereum. It was created in 2015, and since then, its price has surged by about 108,000%.  

As of January 2021, there are over 5000 altcoins in existence. In general, almost all of them have experienced exponential growth over the last few years in their market capitalisation.  

In terms of market capitalisation, Bitcoin leads the pack with a market capitalisation of about 62.8%. That means that Bitcoin accounts for 62.8% of the entire market capitalisation of cryptocurrencies. Although this is still lower than the most recent highs of 72.68%, BTC remains dominant over the altcoins – as it has historically. Here’s a list of the top altcoins based on the percentage of their market capitalization.  

  • Ethereum 17.06% 
  • Tether (USDT) 2.57% 
  • Ripple (XRP) 1.29% 
  • Cardano (ADA) 1.16% 
  • Bitcoin Cash (BCH) 0.86% 
  • Litecoin (LTC) 0.98% 
  • EOS 0.27% 
  • Binance Coin (BNB) 0.68% 
  • Bitcoin SV 0.34% 
  • Stellar (XLM) 0.63% 
  • Monero (XMR) 0.26% 
  • Tron (TRX) 0.22% 
  • IOTA 0.13% 
  • Other altcoins 8% 

Note that the market capitalization of these altcoins changes as their prices fluctuate. 

Here is a list of the top altcoins in terms of daily turnover. 

  1. USDT $88.6 billion 
  1. ETH $39.8 billion 
  1. LTC $5.3 billion 
  1. Uniswap (UNI) $4.24 billion 
  1. BCH $4 billion 
  1. Chainlink (LINK) $3.89 billion 
  1. Polkadot $2.8 billion 
  1. Cardano (ADA) $2.58 billion 
  1. XRP $2.5 billion 
  1. EOS $1.86 billion 

A combination of market capitalisation and daily turnover can be used to determine which cryptocurrency will survive a market crash. 

Best Altcoins in 2021 

Since there are over 5000 cryptocurrencies in the market, with many more cropping up daily, it is best to have criteria for selecting the best altcoins. The most straightforward way of identifying the best altcoins would be to use their liquidity which can be determined by the average daily turnover and the number of coins in circulation. Combining these with the market capitalisation for the altcoins would give you a selection of the fastest growing cryptocurrencies. It will also potentially help you identify which cryptocurrency will survive a crash.   

Apart from the altcoins, which we have listed above, here are the fastest-growing cryptocurrencies to look out for, including their market capitalization.  

  • Dogecoin (DOGE): $1.091 billion 
  • USD coin: $5.297 billion 
  • Wrapped bitcoin: $3.671 billion 
  • Aave (AAVE): $3.272 billion 
  • Tezos (XTZ): $2.365 billion 
  • Synthetix Network Token (SNX): $2.045 billion 
  • Theta Token (THETA): $1.964 billion 
  • NEO: $1.77 billion 
  • Cosmos (ATOM): $1.74 billion 
  • HEX: $1.46 billion 
  • Huobi token (HT): $1.137 billion 
  • Dash (DASH): $1.073 billion 
  • Siacoin (SC): $212.6 million 

What is a market crash in cryptocurrencies? 

A market crash happens when there is an unexpected and often rapid fall in a tradeable asset price. In this case, a crypto market crash happens when the price of a cryptocurrency drastically drops within a short period. Typically, the bear run is triggered by a massive selloff, particularly by crypto whales – those investors who hold large quantities of a particular crypto. When whales begin dumping their crypto portfolio, it may cause a panic in the market leading to a selloff which puts the price into a nosedive.  

Causes of a cryptocurrency market crash 

It is worth noting that cryptocurrencies are decentralised. This implies that economic, fiscal, and monetary policies will not impact cryptocurrencies’ supply or demand, hence the price gets affected. Thus, unlike in the fiat financial sector, it is unlikely that recessions or inflationary factors will lead to a crypto market crash. On the contrary, such factors may contribute to the thriving of cryptocurrencies, as witnessed in 2020. In 2020, cryptos experienced an unprecedented increase in valuation thanks to the economic upheavals resulting from the coronavirus pandemic.  

More so, the decentralised nature of cryptocurrencies means that it is also unlikely for a crypto market crash to happen due to hacking

However, the most glaring threat for cryptocurrencies’ crash comes from price bubbles. For the most sceptical investors and traders, the recent exponential growth poses the highest market crash risk. Year-to-date, BTC appreciated by almost 430% and ETH over 1000%. It is worth noting that, although cryptos were on a steady uptrend before 2020, the coronavirus pandemic stimulated the price surge witnessed after March 2020.  

Another potential cause of the crypto market crash is price manipulation by crypto whales. According to Bloomberg, only 2% of crypto wallets control about 95% of Bitcoin. 

These whales often keep their portfolio in cold storages and this denies the market liquidity. Therefore, when crypto whales sell their holdings, they significantly impact the market price – disadvantaging the small-scale retail traders. If a crypto whale intends to manipulate prices, they put in large sell orders that they know the market cannot absorb. This results in a panic sale by other investors, causing the price to drop drastically. However, it is worth noting that it’s easier to do in the penny crypto market than with Bitcoin or any larger coin.

Will Cryptocurrencies Crash? 

Highly unlikely. But not impossible. 

However, as we noted earlier, the current sustained bullish trend in the crypto market is largely due to the after-effects of the COVID-19. In 2020, governments and central banks worldwide embarked on aggressive expansionary measures using fiscal and monetary policies. Typically, these expansionary policies result in inflation, which tends to devalue fiat currencies. As a result, both individual and institutional investors opted for cryptocurrencies to shield themselves from these effects. In this case, long-term crypto holding presented the most viable store of value. This is because cryptos are not susceptible to the devaluing impact of inflation like fiat currencies. 

Remember that cryptocurrencies are finite in number. Thus, with the limited supply of cryptos, the increased demand for cryptocurrencies in 2020 led to the surge in price. Most people theorise that this increase in prices is merely artificial. 

Is there any hope for cryptocurrency? 

Yes! 

If cryptocurrencies crash, it will most likely be due to contractionary monetary and fiscal policies. If the coronavirus is finally eradicated, economies worldwide will go onto full recovery, resulting in the implementation of contractionary monetary and fiscal policies. These policies will attract investors back to traditional finance, which might spell doom for cryptocurrencies. But this is highly unlikely. 

In the past, most institutional investors shunned the crypto market due to liquidity issues. As we mentioned, a small percentage of whales control the largest share of cryptos. However, crypto derivatives have played a significant role in bringing liquidity back into the market. Crypto derivatives market has surpassed the spot market, accounting for about 55%. 

Crypto derivatives play a significant role in mitigating the crash of cryptocurrencies. This is primarily due to two reasons. Firstly, crypto derivatives have helped increase liquidity in the crypto market since traders and investors do not have to own the underlying coins. Secondly, they have led to efficient price discovery by allowing traders to go long or short as they please. Here are our recommended derivative exchanges:

Cryptocurrency industry forecast 

It is without a doubt that cryptocurrencies are the future of finance. Bitcoin prognosis is stable. Since it is the most preferred cryptocurrency, it is expected to flourish in the long term. Altcoins will be propelled by the development and mainstream adoption of decentralised finance (DeFi). However, since most DeFi platforms are based on Ethereum, any concerns around Ethereum will probably impact the DeFi ecosystem.  

Ethereum has recently introduced the proof-of-stake (PoS) concept to replace Proof-of-work. This presents a more energy-efficient mining coins process – it is estimated to consume 85% less than bitcoin. Adopting PoS for altcoins will increase liquidity and might be the primary determinant of which cryptocurrency will survive a future crash. With the increased regulations and mainstream acceptance of cryptocurrencies, DeFi is expected to penetrate mainstream finance. For top altcoins, the increased adoption is bound to accompany higher valuations and efficient price discovery.  

Cryptocurrency crash and contagion 

The question at the back of our minds is, which cryptocurrency will survive a crash?  

We mentioned earlier that altcoins are designed to mimic bitcoins. The problem with this is that when the Bitcoin market crashes, it is most likely to drag down other cryptos. This was witnessed in March 2020 during the onset of the coronavirus pandemic. On March 12, 2020, bitcoin’s sell-off resulted in about a 66% drop in Bitcoin’s price – from highs of $7969.9 to $4776.59. The bitcoin crash spread to other cryptocurrencies as the top ten cryptos’ market capitalisation dropped by over 30%. 

The only exception to this drop was Tether (USDT) – a stable coin. To answer the question, we asked earlier; if there will be a crypto crash, it is most likely that stablecoins will survive the crash. The stablecoins were designed to eliminate such extreme volatility by pegging their value on other assets. 

The crash of cryptocurrencies poses a significant risk to investors and traders. There are several crypto exchanges with over 5000 different cryptocurrencies listed. However, not all of these cryptos are sound investments.  

To identify altcoins that offer viable investments, base your analysis on the market capitalization, the number of the cryptos issued, and the daily turnover. Generally, altcoins with higher liquidity and higher market capitalisation offer sound investments. This is the best way to identify which cryptocurrency will survive a crash.  

More so, security coins also offer potential investment opportunities since they undergo rigorous due diligence under securities’ laws and pass the Howey Test. However, although crypto exchanges are often fast to list newer altcoins, avoid concentrating your portfolio with them. Research shows that more than 70% of cryptocurrencies that become delisted are delisted in their first year of trading. 

We hope you found this article informative. In case of any queries, please let us know in the comments below.  

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