We start the year with a crypto topic, because investor’s craze for Bitcoin will be absolutely inescapable in 2021, and while Bitcoin is the benchmark when it comes to cryptocurrency, what about crypto-alternatives and interactions that take place between them?
If Bitcoin is now becoming a cryptocurrency more attractive to investors, it is because they see in this asset not only its past and future performance, but also the conviction that it could represent a store of value in the same way as gold, which in a period of inflationary risk appears to be a rather interesting alternative.
Without getting into the controversy of plebiscites in favor of Bitcoin and more conservationist arguments, Bitcoin, whose volatility until then seemed frightening for so many investors, no longer seems to represent a barrier.
Having crossed the threshold of 30,000usd at the end of the week, and posting a drop of 8% today, we are entitled to wonder if Bitcoin is victim of a speculative euphoria, or if it poses a real questionning : that of being an indicator of investor confidence in this asset and more generally in cryptocurrencies.
Looking at the growth in the volume of capitalization represented by Bitcoin, reaching 70% today according to CoinMarketCap, one could be led to think that the uptrend of Bitcoin is linked to a community of investors who consider, that in the long term, Bitcoin is a safe haven.
As for the recent performances of other alternative cryptocurrencies, alcoins (which vary according to their mining system, their technology or the units in circulation) we note quite exceptional performances:
In just one week, the price of Ethereum is up to 51%, over 19% for Chainlink, 26% for Litecoin, over 18% for Binance Coin, not to mention the resounding entry of Polkadot in 6th position of the largest capitalizations ($ 8,829,817) with an increase in the markets of more than 82%.
A very strong demand for these volatile cryptocurrencies, which could be explained by the fact that some investors are using Bitcoin to reduce the overall volatility of their crypto portfolios.
Given the volume of these alcoins, they are most likely institutional investors, who indeed aim to diversify their crypto portfolios. A strategy that has the consequence of fundamentally strengthening certain alcoins, as is the case for Ethereum for example, which increased by 450% between January 2020 and January 2021.
As Raphael Bloch noted this morning on Twitter, « the valuation of Ethereum (127 billion) is now higher than that of Morgan Stanley, Boeing, IBM or BlackRock ».
Ethereum is indeed under the radar of institutional investors. Some of its uptrend can be attributed to the excitement for the ETH Future’s launch on CME next month.
For others, it is an indirect consequence of the airdrop of Spark, a native token of Flare Networks intended to bring an Ethereum-functionality to Ledger XRP (which seems to give XRP a little boost as several investment firms have cut their ties with XRP following the lawsuit of the SEC against parent company Ripple).
Regardless of the reason, Ethereum and other alcoins are rising, following the upward curve of the Bitcoin, which could demonstrate the growing demand from investors both to benefit from the extraordinary performance of alcoins and to reduce the risk of volatility with Bitcoin.
Investors will therefore probably have to consider integrating several cryptocurrencies if they wish to fully optimize their investment strategy. However, there are not less than 8,172 cryptocurrencies to date, according to data from CoinMarketCap.
In 2020, Wealth Monaco had the opportunity to interview Laurent Barocas of Trakx, a platform promoted by Consensys, which offers a solution of financial instruments representative of the crypto ecosystem, to facilitate management for investors. ETFs which could indeed represent an alternative for crypto investors, as indicated by the Bitwisestudy according to which a large majority of surveyed advisers (65%) would prefer to buy crypto in an ETF.
A universe that is opening up for some, and positions that are affirmed for others, but which is advisable to consider as a whole and not to limit to Bitcoin.
Article: Joana Foglia