To continue with our comments from yesterday, we want to take a look at digital assets as a whole, and break it down amongst the major coins within the cryptocurrency ecosystem. As we mentioned yesterday, we had customers ask us late Friday, “What caused this BTC rally of nearly 300 points?”.
The leader of last Friday’s rally was Litecoin. The news came out that Litecoin developers were investigating the possibility to implement the MimbleWimble protocol (of which GRIN and BEAM currently use) into LTC. In these currently thinly traded markets, a rally of 30% for the likes of LTC should rally other coins throughout the space, but eventually, when the news is digested, prices will subside. This rally has led us to look at the entire crypto space’s NET Market Capitalization chart this morning.
As you can see on this chart from https://coinmarketcap.com/charts/, the lows made in mid-December for the NET Market Cap of Cryptocurrencies was just north of $100B USD. This support line is an extremely important mental level, that if broken to the downside proves bearish theses that the bottom is still not in. We like this chart for many reasons, most importantly, it takes away from the noise of a single coin that can make “ALPHA” moves like LTC did on Friday. What it truly shows is the NET inflows/outflows of fiat into or out of the entire asset class. At BitOoda, we will stick to our guns and remain of the opinion we are still in a BEAR market and that the $100B market cap support line will get tested.
The above chart is another data source we are taking a hard look into. This image shows us the Percentage of Total Market Cap of each coin, relative to the NET Market Cap of the entire cryptospace. As we can see, the “Others” line is almost 20% of the currently market cap. We can make two arguments here:
- Newer and better technologically based protocols are enabling these new coins to become more dominate than the legacy and first-mover coins
- These coins are potential “shitcoins” from the ICO madness of last year and we may see many of them go to zero.
What we believe will happen while remaining in this BEAR market is that traders and investors will NOT increase their portfolio allocation or deploy more FIAT into digital assets. However, they will rotate their holdings away from BTC and into Alt coins, therefore chipping away at the BTC’s market cap and Dominance within the sector.
There are many investors in the world that are believers of the underlying technology, but being long BTC may not be the best avenue to express this outlook. Looking at the NET market cap of cryptocurrencies as a whole may be a better alternative.