The world of cryptocurrencies is a strange one. It moves fast, is subject to wild fluctuations in value and is often difficult to keep up with. Recently, however, the world has seen a shift in the cryptocurrency market. Altcoins such as Litecoin (LTC) and Ripple (XRP) have been surging in value, while the granddaddy of cryptocurrencies, Bitcoin, appears to have hit a lull. But why is this happening and what does it mean for the future of cryptocurrencies?
First, let’s take a look at Litecoin. LTC, created by Charlie Lee in 2011 as a fork of BTC, is often lauded as “the silver to Bitcoin’s gold”. And it’s easy to see why. While Bitcoin is often used as a store of value or an investment vehicle, Litecoin is designed to be used as a medium of exchange. It’s faster and cheaper to use than Bitcoin, making it more practical for everyday transactions. This focus on utility has resonated with many investors, leading to a surge in the value of Litecoin in recent months.
On December 10th, 2020, Litecoin was trading at around $80. Today, less than five months later, it’s valued at over $300. That’s a massive increase in value, especially when compared to Bitcoin, which has only increased in value by around 100% in the same time frame.
Of course, it’s worth noting that Litecoin is still significantly less valuable than Bitcoin. At the time of writing, Bitcoin has a market capitalization of over $1 trillion, while Litecoin’s market cap is just over $20 billion. But the fact that a smaller cryptocurrency like Litecoin can see such a significant increase in value is indicative of a wider trend in the cryptocurrency market.
And that wider trend is centered around altcoins. Altcoins are any cryptocurrency that is not Bitcoin. There are thousands of them, and they range in value from a few cents to several thousand dollars. And while they’ve often been seen as a sideshow to Bitcoin’s dominance, that’s starting to change.
One of the most significant altcoins at the moment is Ripple (XRP). XRP is designed to facilitate cross-border payments, and it’s seeing a surge in value thanks to a couple of recent developments. The first is a partnership with financial services provider TCS, which will see XRP used in TCS’ blockchain platform. The second is a lawsuit brought against Ripple by the US Securities and Exchange Commission. While the lawsuit has caused some turmoil in the XRP market, it’s also brought attention to the cryptocurrency, leading to increased demand for it.
At the time of writing, XRP is valued at around $1.60, up from around $0.22 at the start of the year. That’s a massive increase in value, and it’s indicative of the wider trend of altcoins surging while Bitcoin remains relatively stagnant.
So why is this happening? One possible explanation is that investors are looking for new, cheaper cryptocurrencies to invest in. While Bitcoin is still the most valuable cryptocurrency, it’s also the most expensive. A single Bitcoin is currently valued at around $55,000, making it out of reach for many investors. Altcoins like Litecoin, on the other hand, are much more affordable, making them an attractive option for those looking to get into the cryptocurrency market.
Another possible explanation is that altcoins simply have more utility than Bitcoin. While Bitcoin is an excellent store of value, it’s not particularly practical for everyday transactions. Cryptocurrencies like Litecoin and XRP, on the other hand, are designed to be used for transactions, making them more useful to investors looking for a practical application for their cryptocurrency investments.
Of course, it’s worth noting that cryptocurrencies are still a highly volatile investment. While Litecoin and XRP have seen significant increases in value in recent months, they could just as easily see a rapid decline in value. And Bitcoin, despite its current stagnation, could just as easily surge in value once again.
That being said, the current trend of altcoins surging while Bitcoin stagnates is an interesting development. It suggests that investors are starting to look beyond Bitcoin and towards the wider world of cryptocurrencies. And that, in turn, could be a good thing for the cryptocurrency market as a whole. As more investors start to explore altcoins, it could lead to increased innovation and competition in the market, which could ultimately benefit everyone involved.
On Wednesday, while Bitcoin and Ether remained relatively flat, altcoins experienced significant gains. Litecoin and XRP increased by around 5%, according to Coin Metrics, while The Sandbox Token surged by 4% and the Axie Infinity Token by 8%.
Ripple, the company behind XRP, made a major announcement on Wednesday. They acquired Metaco, a Swiss cryptocurrency custody services firm. Through this deal, Ripple is expected to gain access to clients like Citi and BNP Paribas, as well as expand its overseas presence.
Crypto price action has been relatively subdued over the past month, despite recent upticks in volatility due to thin liquidity in the market. However, realized 30-day volatility for both Bitcoin and Ether are off their record lows of the year, according to Glassnode.
As a result, some investors have shifted their attention away from Bitcoin and toward smaller and newer tokens, or “altcoins.” This trend is a recurring period in the Bitcoin cycle known as “altcoin season.” In recent months, Bitcoin and Ether have been regarded by many as so-called “blue chip” or “flight to safety” assets in crypto.
Noelle Acheson, author of the “Crypto is Macro Now” newsletter, notes that “Like macro markets, juggling resilient stock prices with increasingly bleak economic data points, the crypto market is also dealing with duality. There are some signs of frothiness.” Specifically, earlier this month Ether briefly rallied, and the Bitcoin blockchain saw a record high in daily transactions amid a surge in interest around memecoins and NFT-like tokens on the Bitcoin network called ordinals.
Despite these signs of frothiness, activity in the crypto market has been low, with prices down more than 10% on the month and volumes trending lower. Bitcoin and Ether both continued to hover around the flat line on Wednesday, at the $27,000 and $1,800 levels, respectively.
Overall, while Bitcoin and Ether remain the most well-known and widely traded cryptocurrencies, the rise of altcoins suggests a broader trend toward diversification and experimentation in the crypto market. Whether this trend will last remains to be seen, but for now, it seems that investors are eager to explore new opportunities in this rapidly evolving space.