In the digital currency space, it’s common for many coins and tokens to move in similar patterns. When bitcoin (BTC), the largest cryptocurrency by market cap, goes up, other digital tokens tend to increase in value as well. When BTC declines, it’s likely that other players in the space will drop at the same time.
In recent weeks, as many cryptocurrencies have fallen even further in what has already been a tough year so far, this pattern has held. However, as a report by Zycrypto.com indicates, something interesting has been happening: ethereum and other altcoins have been hit harder than bitcoin, overall. Why is it that altcoins are suffering more significant losses than the top digital currency?
Bitcoin ETF News
The report indicates that bitcoin has commanded more than 50% of the total cryptocurrency market cap in recent weeks. One important turning point for the crypto space was the announcement that the U.S. Securities and Exchange Commission (SEC) would delay any announcement of a decision regarding the approval of a cryptocurrency exchange-traded fund (ETF) until the end of September. While this announcement, which took place earlier in August, spelled trouble for all digital currencies, it seems to have had a longer-lasting and more significant impact on ethereum and other altcoins.
While investors sold off digital currencies following the SEC announcement, bitcoin was able to hold its value better than other coins. Ethereum dipped to its lowest price in about a year, falling below $300.
One explanation for the resilience of bitcoin relative to other cryptocurrencies is that investors in the space may view BTC as the most stable digital token at the moment. Detractors can still point to high levels of volatility in BTC, but it is nonetheless more established than some other tokens. Investors feeling skittish about newer, smaller cryptocurrencies could reasonably be expected to transfer their funds from altcoins to bitcoin while the bear market is in effect.
Another potential factor in bitcoin’s relative strength compared to other tokens could have to do with the geopolitical environment. Ongoing civil unrest and increasing economic struggles in Turkey have prompted a significant influx of investor money into the cryptocurrency space. The report suggests that a large proportion of these assets has gone straight to bitcoin. The Turkish lira has fallen considerably, and many people in Turkey have turned to BTC as a more stable store of value than their local fiat currency.
The situation in Turkey could be a glimpse into what might happen on a larger, global scale during the next significant financial crisis. For many cryptocurrency enthusiasts (as well as digital token skeptics), the true test of bitcoin and other coins will be when there is another financial meltdown. Will investors flock to cryptocurrencies as a group? Will they turn their attention predominantly on a single player, like BTC? Or will cryptocurrencies collapse along with mainstream economic institutions?
Regardless of the combination of reasons for bitcoin’s relative success in recent weeks, the key term here is indeed “relative.” Bitcoin is still struggling, as it has throughout much of the year. While it remains on top of the digital currency landscape, that space is suffering from significant losses compared with where it was at the beginning of the year.