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, there have been vocal voices on both sides of the coin. Investors have flocked to take advantage of the rapid gains in Bitcoin, Ethereum, Ripple and other virtual currencies, but at the same time, some of the biggest names in finance have denigrated the cryptocurrency space, calling it a bubble or worse.
In a recent interview with Coin deskShapeShift CEO Erik Voorhees, a longtime digital currency advocate, admits that he believes the digital currency space is susceptible to bubble phenomena. However, while there has been much talk of a digital currency bubble in recent months, he goes further; Voorhees suggests that there are actually two different bubbles at play at this point.
A Tale of Two Bubbles: Bitcoin and Altcoin
According to Voorhees, “Bitcoin is more relevant than ever, but other digital assets have also grown with it.” Among the most important of these other digital assets are the so-called altcoinsany of several alternative digital currencies that have been modeled after Bitcoin in some way, and which, in most cases, claim to be better than Bitcoin in some way.
Voorhees cites Ethereum, suggesting that Ether “has done much better this year than Bitcoin, and yet Bitcoin has more transactions, more users, more market cap than it ever has before.”
On one hand, this is all good news for the cryptocurrency space. “I think it proves a point I’ve been making for a long time, which is that cryptocurrencies are not mutually exclusive,” Voorhees said. “They don’t just grow by competing with each other. The entire industry is growing by competing with traditional finance.”
On the other hand, and perhaps because “the average person only keeps a little bit of it as a speculative investment,” and since “no one, no company, and no group of people can control” the cryptocurrency world, Voorhees believes we are in a series of bubbles.
He sees bubble behavior “in alts since the rise of ethereum and bitcoin this fall. They’re both still in their bubble phase, and I don’t know how high the bubble will go or how far it will fall. But they’re definitely in a bubble.”
Voorhees continued: “I think bitcoin will trade lower than it is today in 2018. But I’ve been through a number of these bubbles. There will be more of them. And in the long run, if this stuff takes over the world, the best strategy is to just buy it and hold it. But anyone who buys it and thinks it’s going to go up immediately and cash out and make a lot of money is probably going to suffer the consequences.”
Problems with double bubble?
What if there were actually two bubbles instead of one larger digital currency bubble? Perhaps these bubbles would burst differently and at different times? It has been notoriously difficult to predict what digital currencies will do, and it is not necessarily true that the bursting of a Bitcoin bubble would be synchronized with the bursting of an altcoin bubble.
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