By Gaurav S. Iyer, IFC Published : March 27, 2018
Ethereum News Update
As Ethereum prices continue to fall—alongside the rest of the market, I might add—investors are concentrating their funds in Bitcoin, otherwise known as digital gold.
Bitcoin has drawn these comparisons for much of its history, though the reasons have evolved with time.
At first, investors argued that Bitcoin’s fixed supply mirrored the real-life limitations of gold deposits. Now, however, investors point to the use of gold as a safe-haven asset, arguing that Bitcoin serves the same purpose in cryptocurrency markets.
There’s even a metric to reveal the market’s concentration in Bitcoin. It’s known as BTC Dominance.
Like with anything else, BTC Dominance is a function of the market. It morphs over time as the cryptocurrency market goes through its extreme business cycles, reaching near 30% during long stretches of calm, and soaring above 50% when crisis arrives.
Right now, it is surging…
Bitcoin’s share of the total has increased from 39.5% to 45%. This increase took place at the same time money flowed out of the cryptocurrency market, meaning that in order for that money to re-enter the market, it will have to pass through Bitcoin again (because you can’t buy most coins directly from fiat currency).
This suggests that the disparity between Bitcoin and its peers is starker than we previously thought. Investors are trapped in a vicious circle.
There is one potential silver lining in that Ethereum’s market share fell by almost the same amount that small altcoins’ market share rose. If we’re reading this correctly, it means that some investors fled, not to Bitcoin, but to the lower-tier altcoins market.
Times of crisis usually serve Bitcoin prices. Whether I think it’s rational or not, the “digital gold” narrative is a deeply embedded cryptocurrency culture.
I mean, yes, it’s possible that a contingent of smart money is waiting out the storm in altcoins. But would I bet my life savings on that proposition? Probably not. At least not on the scant evidence we currently have.
Instead, I’d wait for the relative safety of larger cryptos. If our $1,500 Ethereum price forecast is anything close to accurate—as many of our previous forecasts have been—then we’re still talking about triple-digit upside.