Whether Bitcoin is still the market leader?

    12 Sep 2021

    Bitcoin prices have been doing well lately, while other major cryptocurrencies are outshining Bitcoin with their performance. According to CoinDesk price data, Ether, the second-largest crypto asset by market cap, more than doubled in recent months, while Cardano’s ADA token tripled by the same time. That’s why some investors are wondering whether Bitcoin is still the market leader it was for years?

    Charles Bovaird of Forbes asked several prominent investors and experts regarding Bitcoin’s perspective.

    “For most of its history, Bitcoin has acted as the reserve currency of the crypto ecosystem, leading the direction up or down for everything else,” said cofounder and CTO of crypto hedge fund Strix Leviathan, Jesse Proudman.

    “Over the past few months, we’ve witnessed a marked change in that status and over the last week, we’re seeing the beginning of a clean break where Bitcoin is now following moves of other currencies like Ethereum,” he added.

    CIO of asset manager Arca Jeff Dorman expressed his thoughts a bit more straight.

    “Bitcoin does not lead markets anymore,” he claimed. “It has exhibited both poor upcapture and poor downcapture all year, meaning it doesn’t keep pace with rallies AND sells off more than other assets in downturns.”

    “More importantly,” Dorman said, “everyone (other than the individuals and businesses that rely solely on Bitcoin’s success) are beginning to understand that Bitcoin shouldn’t be tied to the success or failures of other assets. They are completely different.”

    “Unlike the early days of digital assets where Bitcoin was the only game in town, this asset class has now evolved far beyond cryptocurrencies,” he added. “There are new sectors that have much faster growth trajectories, like DeFi (decentralized finance), gaming, sports, NFTs and web 3.0, all of which have completely different factors and token attributes that contribute to their returns.”

    Jesse Knutson, Blockstream VP of financial products, offered a more optimistic view, looking at the world’s first cryptocurrency development.

    “I think what we’re seeing here is the maturation of Bitcoin,” he claimed.

    “Over the past 12 months, there’s been an incredible amount of institutional and even sovereign interest in the space,” noted Knutson. “This interest has been focused almost exclusively on Bitcoin.”

    “The largest asset managers in the world, firms like Capital, Fidelity, Blackrock, and Tudor are trying to build Bitcoin exposure, but are still largely limited to listed proxies and derivative products,” he added. “Morgan Stanley and JPM are rolling out dedicated Bitcoin products to private wealth clients, and countries like El Salvador are looking to Bitcoin not only as a growth driver but to also actually solve financial infrastructure challenges.”

    Knutson pointed: “Given the massive change in market participants this year, I think it makes sense to see some price divergence between Bitcoin and more speculative digital assets from time to time,” also adding: “The macro backdrop is extremely supportive of the Bitcoin investment thesis and there is a wave of money building that I think will probably struggle to fit into what is still a relatively small asset class by institutional and sovereign standards.”

    Some other analysts offered differing perspectives on how they think the broader crypto-asset markets will mature soon.

    Amber Ghaddar, the cofounder of decentralized capital marketplace AllianceBlock, stated: “The crypto asset class is viewed by many as a monolith driven by Bitcoin.”

    “Our thesis has always been that even if Bitcoin is the poster child of crypto, bifurcation and a decrease in correlation is to be expected in the long run,” she added.

    Ghaddar said she expects individual digital assets over time to derive their values less from speculation and more based on their own specific features.

    “Prices are made of two components: a fundamental component and a speculative component. The speculative part is usually the largest and is driven by sentiment, future expected uses, and scalability,” Ghaddar pointed. “We expect the fundamental component – easily calculated by looking at network data – to take a larger proportion of price as new layer 1 blockchains start maturing and/or go live.”

    Future Perfect Ventures founder and managing partner Jalak Jobanputra also noted the growing divergence between Bitcoin and other crypto-assets: “We have firmly believed in a multi-crypto world and that each currency will eventually be valued according to its particular use case.”

    “Bitcoin has emerged as a store of value and inflation hedge while Ethereum has become the currency for DeFi and NFT applications, and thus in many ways the reserve currency for Web 3.0. I expect Bitcoin will follow more macroeconomic trends as it is doing right now,” she added: “This is an exciting transition as we are seeing some of these more blue-chip cryptos come into their own beyond being used as tools for speculators.”

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