Bitcoin the Bellwether Shines Brightest

Caught up in the euphoria of crypto’s rise, all sorts of new altcoins were issuing their denominations as soon as they could figure out how to get to market.

Perhaps a moral hazard but certainly a sign of the speculative times of 2020.

Thousands of coins using thousands of celebrities came out of the woodwork to claim their coin was the best.

Of course, they weren’t.

Now, the crypto climate has drastically shifted to risk-off sentiment and the knock-on effect is hitting the obscure altcoins the most.

Sometimes, a clean palate is needed to really taste the quality of food and that’s what is happening in the crypto industry as we speak.

The “competitors” are falling by the wayside as the likes of Solana and Polkadot to Litecoin and Dogecoin promised to recapture the imagination of the crypto ecosystem.

Some even suggested an imminent rapid fragmentation of the crypto market into silos with different currencies dominating different areas like a Mongolian warlord in their prime.

But things haven’t worked out like that.

Bitcoin has cut its loss of market share this month and begun to regain ground, as baffled investors seek the relative safety of the biggest crypto coin while they grapple with an aggressive Fed and inflation shooting through the roof.

Bitcoin's share of the $1.68 trillion crypto market has risen to about 42%, from 39% two weeks ago - the first time it has registered an increase since dropping from a peak of 46% in mid-October, according to data from CoinMarketCap which tracks 17,225 cryptocurrencies across 458 exchanges.

Bitcoin has outperformed the industry at a time when the entire crypto market has fallen this month.

Nonetheless, the bellwether Bitcoin could continue to outperform its crypto rivals from the more hesitant investment climate.

The concept of the path of least resistance means that investors hideout in Bitcoin and spurn the Dogecoins and Shiba Inu coins of the world for now.

While most cryptocurrencies still take their price signaling from bitcoin, these currencies that were hyped up and marketed to the hills could find bids drying up quickly.

Pockets of strength will periodically emerge, and catching a few of those shifts will be incredibly important for performance this year.

Bitcoin has taken the bullets but hasn’t outright crashed and it shouldn’t, but I can’t say the same about these smaller coins.

Cryptocurrencies hyped for their blockchain application used to build decentralized finance applications have underperformed greatly to Bitcoin lately.

Solana, which jumped 100-fold in 2021, is down 47%, while Polkadot is down 41%.

The selloff that began in December has however been less volatile and seen lower volumes transacted than bitcoin's previous rout in May 2021, when it halved in nine days.

We are range-bound now and that’s a far cry from the crypto “winter” many have been calling for.

If another monster risk-off moment does come, the last place an investor wants to be exposed is the crypto minnows.

If Bitcoin does retrace 5%, it certainly will be felt more in the altcoins sub-genre.

Once we do recover and find some footing, we will look back at this moment and realize it was a time when we separated the wheat from the chaff in the crypto industry.

I believe that Bitcoin will continue to consolidate its position at the top of the crypto pecking order.