Bitcoin has broken its all-time high and has more than doubled in value at the peak, but why have some other coins failed to keep up?
Since then, the price of Bitcoin has suffered a correction, and most of the crypto market followed. Bitcoin is currently sitting at just over $35,000, and while traders suggest the pullback to be a healthy correction required for Bitcoin to maintain its bullish momentum, some believe the cryptocurrency may plunge below the $20,000.
The Bitcoin price action has also been reflected in the altcoin market as it usually does, with many popular cryptocurrencies surging alongside BTC. Noticeably, Ether (ETH), the native token of the Ethereum platform, has doubled in value in the last month and is currently sitting at over $1,300.
While Bitcoin has blasted through its previous all-time high, multiple coins in the top 100 have yet to do so despite seeing substantial price surges. This may suggest that a new alt-season may be coming, especially as multiple DeFi tokens break into the top 20 market cap even as the direction of Bitcoin’s price remains uncertain. Jonathan Hobbs, the author of The Crypto Portfolio and a former digital asset fund manager, told Cointelegraph:
“Bitcoin dominance has started to drop against altcoins. While not yet a full-blown ‘alt season,’ the signs are certainly there for one. I would like to see Ethereum break the $1,500 level for a final alt season confirmation.”
While the latest crypto rally has taken the global cryptocurrency market capitalization to the $1-trillion mark, there have been a few notable cryptocurrencies that have failed to keep up with Bitcoin’s growth for different reasons.
Ripple and the law
After some bullish action in November, XRP’s price began to drop heavily on Dec. 22, following reports that the U.S. Securities and Exchange Commission was preparing to take legal action against Ripple, its CEO, Brad Garlinghouse, and co-founder Christian Larsen. Since the company has overcome other issues with regulators in the past, many hoped that the news would not amount to anything.
However, by Dec. 23, XRP had plummeted by 41%, and exchanges began delisting the cryptocurrency. By the end of December, XRP was delisted from major exchanges such as Coinbase, Binance US and OKCoin, with a few exceptions like Uphold and GateHub leaving the crypto for trading until the court decision. Currently sitting at $0.28, XRP has dropped around 47% in the last 30 days.
Keeping up with Ether
As Bitcoin rallied throughout the month of December and January, Ether has rallied alongside it. Since Dec. 18, Ether has grown substantially, although so far, it has barely managed to reach its all-time high. However, other smart contract-centric projects have failed to follow along even with Ether’s rally. These include NEM, EOS and Tron, which are all in the top 30 for the biggest monthly value losers in the top 100 cryptocurrency list by market cap.
While NEM has lost 21.6% of its value in the last 30 days, it did so after a considerable price increase during the month of November. EOS and Tron prices have dropped 11.6% and 2.69%, respectively. Both Block.one, the company behind the EOSIO ecosystem, and Tron have faced issues with regulation in the past, with the former receiving a $24-million fine from the SEC in October 2019 and the latter currently facing a lawsuit pertaining to its 2017 initial coin offering.
However, it seems that a more plausible reason as to why these projects are failing to grow alongside Bitcoin is that they are seen as direct competitors to Ether, which has had a great run in the past month and hosts most of the DeFi industry. Hobbs told Cointelegraph:
“Bitcoin and Ethereum have already proven themselves with real-world use and strong network effects. Bitcoin is digital gold. Ethereum houses over 95% of all DeFi smart contracts. I think that makes them less speculative than other digital assets right now.”
Monero, Dash, Zcash and other privacy coins
Privacy coins also came under regulatory fire in 2020. On Jan. 1, U.S. exchange Bittrex announced that it would be delisting Monero (XMR), Zcash (ZEC) and Dash, the three biggest anonymity-centric cryptocurrencies on the market. While unlisting these cryptocurrencies was an initiative by Bittrex, it does not come as a complete surprise, especially as regulators continue to crack down on crypto.
On Dec. 23, the U.S. Treasury Department’s Financial Crimes Enforcement Network issued a proposed rule change, in which it stated that anonymity-enhanced cryptocurrencies, like those mentioned above, are becoming more popular and are believed to be more closely associated with illicit activity such as money laundering and ransomware attacks.
As frequent hacks on decentralized finance and other sets of crypto continue to occur, with the funds being disposed of in crypto exchanges, it also makes sense that the venues would want to disassociate themselves from untraceable money laundering and to comply with any upcoming regulation.
As a result, trust in privacy coins seems to be shaken. Monero and Dash rose 0.79% and 3.79%, respectively, in the last 30 days. While these numbers don’t seem bad, they pale in comparison to Bitcoin’s price action. According to Dr. Octavius, co-founder of DeFi protocol OctoFi, the growth of the DeFi space may help these types of coins survive any upcoming regulatory hurdles:
“For many of these projects, their days as a ‘product’ are likely numbered, but the opportunities to pivot toward existing as ‘features’ are certainly plentiful. […] Those who value privacy will go to great lengths finding it, and so long as there’s permissionless access to it, projects who enable it can still thrive.”
Another predominant type of token that seems to have stayed on the sidelines during the BTC rally was tokens issued by centralized exchanges, including Nexo, Unus Sed Leo (LEO) and Crypto.com Coin (CRO). While the fundamental value proposal for these tokens remains the same, they are somewhat tied into the success of the venues they are associated with, being used mostly for discounts on trading or lending fees or other perks.
With DeFi on the rise, it seems likely that people would rather speculate on DeFi-related tokens or invest in the yield farming protocols themselves, which could account for the slow price action on these assets. LEO has dropped 1.66% and Nexo has surged by 11.3% in the last 30 days.
What’s next for alts?
While it is unclear what the road holds for coins like XRP, Dash, Monero and ZEC, whose future seems to be heavily tied to upcoming regulation, it looks like there’s a general shift in interest taking place when it comes to altcoins, especially as multiple DeFi tokens begin to take their place in the top 20 market cap list.
As for smart contract platforms, it also seems unlikely that Ethereum will be dethroned soon, especially as the network continues to make strides toward the full release of Eth2. Not all Ethereum competitors are doing badly, however, as for example, the price of Near Protocol (NEAR) has recently soared 106% amid the current DeFi craze.
Some have noted that the current bull market is likely to do away with speculative coins, as more value is now concentrated on Bitcoin and Ethereum, a clear divergence from what was observed in the 2017 rally that took BTC to its previous all-time high.
On Dec. 16, Bitcoin’s price breached its previous all-time high of just over $19,500, previously reached on Dec.17, 2017, according to data from CoinMarketCap. Since then, Bitcoin (BTC) has seen an incredible bull run, which has led the cryptocurrency to new heights, having reached an all-time high of $41,941 on Jan. 8 and rallying by over 115% during this time.