Well in actual fact we’ve got a little more than ninety nine useless tokens, likewise we have a little more than one useful token, however the ratio works out about the same regardless. For every 100 tokens, only one has any real value.
According to Coinmarketcap.com we now have a total of 1519 Cryptocurrencies which give us a combined market capital of around $500 Billion. Bitcoin currently dominates this market capital by about 38%, a share of the market which has declined rapidly over the past 12 months. Only one year ago Bitcoin still held over 85% of the cryptocurrency market share.
So What Happened?
If you speak to some people, like say Roger Ver he would tell you that Bitcoin has lost it’s dominance over the total market capital due to the ever increasing transaction fees and lengthy processing times – however any rational being knows it had nothing whatsoever to do with any aspect of Bitcoins function and everything to do with increase in competition and alternatives. We have to remember this is still a relatively new and emerging asset class. It’s only in the last 12 months we’ve seen an explosion in Cryptocurrencies, most of which are useless at best and scams at worst.
To make the argument that Bitcoin has lost it’s market share due to it’s loss of ability as ‘Digital Cash’ is just stupid, be honest how many use Bitcoin as ‘Digital Cash’? Not many, the extremely wealthy initial Bitcoin adopters may well use it for this purposr, however the majority of others who own Bitcoin HODL it in the hope it will increase in value. So the majority of people couldn’t give a damn about transaction times and fees at this point in time, this is a fact whether Bitcoin Cash supporters want to accept it or not.
Bitcoin lost it’s market share simply because the the market has expanded exponentially over the past year with new cryptocurrencies and tokens being released every day. The problem is this, only around 1% of the listed currencies actually have any real value and that’s an optimistic estimation because i’m feeling generous today.
The Rise Of The Altcoins
There are few Cryptocurrencies listed on Coinmarketcap.com that actually have any real value, yes they may have a stated market capital of a $350 Million or more, however the volume is often so small that it’s market capital is literally being determined by a handful of orders. But aside from that most also have no real roadmap, development team or valid use case. If you consider the fact that we could goto github right now, fork off from the Bitcoin repository , change a few parameters, compile and boom, we have our altcoin. In fact it’s easier than that now, with websites doing even this simple exercise for you in a few clicks, creating a Bitcoin Fork has never been easier!
Then you can either pay someone a small fee to create a nice website with roadmap and whitepaper, or use one of the hundreds of templates circulating the net and off you go.
With so many exchanges willing to accept just about any new crypto, you can be sure to get it listed somewhere, make a single trade and your new coin could easily have a total market capital of $100 million. You have to remember that a coins market capital is not determined by the capital which has flowed into the market, it is simply:
$Last Order Value x Market Supply = Market capital
So if you have a coin supply of say 50,000,000 and the first trade is made for the coin at $2 then already based on total volume of $2 flowing into this new asset it’s total market capital hits $100,000,000.
$2 x 50,000,000 = $100,000,000
This is not real value and in my opinion any cryptocurrency with virtually no liquidity should be discounted from the cryptocurrency total market capital. Now, aside from the hundreds of coins which have no significant volume or liquidity there are plenty with lots of volume and liquidity but still don’t have any real value, well at least in the mid to long term. This is a 99% speculative market, most assets are valued based on speculation, it’s also worth noting that we are not dealing with traditional traders here, though they exist in Cryptocurrency they are the minority.
Cryptocurrency trading, specifically the altcoin markets is being driven by young inexperienced traders, most of which have heard of the insane gains made by others with Cryptocurrency and Bitcoin and want to take their piece of the pie. This can create an extremely volatile and overvalued market which has it’s value derived from the ‘get rich quick’ mentality of some inexperienced traders rather than the actual project’s worth.
ERC-20 Tokens and the ICO Revolution
Although some of the new listings on Coinmarketcap are Bitcoin forks and a very small number are new uniquely developed cryptocurrencies, the majority now are just Ethereum ERC-20 tokens.
Ethereum was initially designed to be a platform for developing Decentralized Apps (DAPPS), however, it has in just about all cases been used for creating Initial Coin Offerings (ICOs). New tokens can be created with relative ease and at relatively low cost, this being the case it’s no wonder that we already have 448 tokens on the Ethereum platform, the combined value of these tokens alone amount to around $40 Billion. However with almost 50% of all ICO’s from last year already failing these valuations are once again likely to be closer to zero in in the not to distant future.
It’s Not All Bad, Honest
So with the majority of the Cryptospace being filled with scams and useless tokens that will all eventually find they’re way to the ever growing ghost town of empty telegram groups, dusty whitepapers and dead-end road maps is the Cryptocurrency craze just a passing fad?
No, in fact it’s still very underrated, the potential that Cryptocurrency and Blockchain based technologies have to change the World is beyond even what most experts expect, it will undoubtedly move us into a new era of technology and innovation. It’s becoming a little tedious hearing of comparisons between the early stages of the Internet and the early stages of Cryptocurrency and Blockchain, but its a great comparison – 99% of early Internet startups failed, we saw some insane .com valuations who’s value came from it’s ‘.com’ rather than anything the product had to offer. But eventually the bubble popped and the crap subsided leaving behind one of the biggest technological evolutions in the known history of Human Society, only really comparable to maybe the Railroad revolution.
In the not to distant future the ICO scams, the false promises and the useless coins will all fall away leaving a far healthier market, if all such coins fell away today I believe Bitcoin’s market dominance would be up around 80% once again, however there are some very promising new projects and some longtime Cryptocurrencies that have proven their value – They are just very few and far between!