Why is Bitcoin still at the helm?

Since its launch in 2008, Bitcoin has remained the flagship cryptocurrency, outstripping altcoins in value and capitalization. In January and February 2021 alone, the cost of bitcoin increased by 78.5% from $ 28 thousand to $ 50 thousand.On February 21, the coin renewed its historical maximum, reaching $ 58.3 thousand, writes RBC Crypto.

This year, large companies began investing in cryptocurrency: Tesla, MicroStrategy, The Motley Fool and others. The readiness to buy the main digital coin was also expressed in the largest hedge fund in the world Bridgewater Associates, but only after the volatility of bitcoin decreased.

Nevertheless, over 13 years, a lot of digital coins have appeared on the cryptocurrency market, and it is possible that in the future, some of the altcoins may put an end to Bitcoin’s leadership. So far, according to Google Trends, Bitcoin is clearly ahead of other digital coins in popularity, such as Ethereum, Litecoin, Dogecoin, and Cardano. However, altcoins are already overtaking the main digital coin in popularity. This is indicated by the data from the crypto tracker ICO Analytics, according to which Dogecoin was mentioned on Twitter more often than any other cryptocurrency over the last month. Dogecoin discussions accounted for 10.4% of the total mentions of cryptocurrencies on the social network.

Volatility

Now the volatility of bitcoin remains high in comparison with classical financial markets and their assets. But in recent years it has declined, said Viktor Pershikov, a leading analyst at 8848 Invest. He cited the example of November 2013, when the main digital coin went up in price by 350% in a month. According to Pershikov, in February 2021, bitcoin has risen in price by “only” 37% and in the future, due to an increase in capitalization, the volatility of the digital coin will continue to decline.“The decrease in volatility is due to a significant increase in the capitalization of the crypto market, as well as an increase in the price of an asset. The cheaper and low-capitalized asset, the higher its volatility, ”added Pershikov.

For more than 10 years of Bitcoin’s existence, the number of trading participants has grown to millions and continues to grow, says Mikhail Karkhalev, financial analyst at Currency.com crypto exchange. The more bidders there are, the stronger the opposition between sellers and buyers, which keeps the price from the roller coaster. In his opinion, today there are enough instruments (derivatives) on the cryptocurrency market that also help reduce volatility: options and futures make the price movement a little more stable and predictable.

Recently, volatility has also increased in standard financial markets and for some shares even exceeds the amplitude of Bitcoin’s movement, added Cryptorg.exchange CEO Andrey Podolyan. An example of this is the recent rally in GameStop stock, fueled by the Reddit community. In January, the value of the company’s shares rose by 1941% from $ 17.25 to $ 347.50. Tesla’s stock return for 2020 was 642%, while Bitcoin’s return for the same period was 296.9%.

Transformation

At the beginning of its journey, Bitcoin was simply an implementation of blockchain technology, and was of interest to a narrow group of people. Now the coin is a real exchange commodity with the properties of a protective asset that allows you to preserve value, Pershikov notes. Bitcoin mining has evolved from a hobby for computer geeks to a new economic industry, he said.

Three halvings have already occurred on the bitcoin network. The last halving to date took place on May 11, 2020. Then the reward for the block mined by the miners was halved – to 6.25 bitcoins. The next halving is due in 2024. Every decrease in the reward for mining a block was accompanied by a market reaction. For example, the first two halvings were accompanied by increased coin volatility over the next year. After the halving of 2020, bitcoin entered a growth phase that continues to this day.

At the end of 2017, one of the most significant events in the history of cryptocurrency took place. The CME Group of Chicago exchanges has issued Bitcoin futures. Immediately after that, the price of the main digital coin and altcoins began to fall and entered a phase of long-term decline that lasted more than a year. Already at the end of 2020, financial institutions turned their attention to other coins. CME Group launched Ethereum futures trading. Ether became the first altcoin traded on the stock exchange.

The main transformation that happened to bitcoin over the years of its existence is the adoption of cryptocurrency by the masses, Podolyan believes. He recalled that four years ago a digital coin was considered exotic, and today it has become a tool for investing and saving money not only for private investors, but also for large companies. Transformations of the main digital coin can turn it into one of the world’s reserve currencies, added Nikita Zuborev, senior analyst at Bestchange.ru.

Liquidity

Nikita Zuborev advised not to focus on the capitalization and market value of bitcoin when evaluating it as an asset. According to him, these parameters are secondary market indicators, and you need to pay attention to liquidity.”What is the use of a token three times more expensive than bitcoin if it is impossible to exchange it quickly, simply and without significant losses for goods and services?” – says the analyst.

In the case of bitcoin, there is a fairly extensive infrastructure for accepting payments, even without automatic conversion of an asset to fiat through payment gateways, Zuborev notes.

Competition

From the point of view of a blockchain solution, bitcoin is inferior in its characteristics to other tokens and cryptocurrencies, according to a leading analyst at 8848 Invest. He notes that from the standpoint of the cost and speed of transactions, Litecoin may well compete with it, and from the standpoint of demand for a blockchain product, the Ethereum project is currently much more promising (for example, from the point of view of DeFi).”Bitcoin is the top asset in the market solely based on its capitalization, the status of the” first cryptocurrency “, and lower regulatory risks than private blockchain networks such as ETH, XRP, ADA and others,” added Pershikov.

According to the analyst, in the next 5-7 years, Ethereum and Cardano can shift bitcoin from the first place against the background of a multiple increase in the capitalization of these blockchain projects. Pershikov notes that the dominance of bitcoin will decrease, since it is less suitable as a unit of international payments, and is unlikely to be able to compete with digital government currencies. Ethereum is often underestimated, however, it was thanks to the brainchild of Vitalik Buterin that thousands of projects, promising and not very promising, were created, smart contracts, DeFi, exchanges and much more appeared, explained Mikhail Karkhalev. According to the analyst, if bitcoin is the foundation of the industry, then ether is the engine of the industry’s progress, and in this sense, both cryptocurrencies are equal.

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