Bitcoin Is Doing Well, But Not Too Well
Bitcoin has jumped by more than 15 percent in the past week alone, which may seem rather good at first. However, Ethereum – the second largest cryptocurrency by market cap and the number one competitor to bitcoin – has surged by more than 20 percent, thereby making the primary asset of bitcoin look rather small by comparison. In addition, this 20 percent has come within the last seven days.
Furthermore, XRP – the cryptocurrency of Ripple – has jumped by more than 25 percent, while Litecoin, Polkadot, Cardano and Stellar have also incurred several high-end surges. Greg King – CEO of Osprey Funds – explains what could be happening with these smaller assets:
Part of what’s going on is simple math. Smaller coins can have bigger [percentage] moves and there are a lot of other coins that people can invest in… It makes sense for investors to have a portfolio with bitcoin and Ethereum for the long term and own a basket of some of the rest of the others for trading.
However, when all is said and done, many industry experts and analysts claim that while these coins may be experiencing higher surges, they are still riding the bitcoin train. In other words, it is bitcoin’s performance that is allowing them to surge.
According to Michael Shaulov – CEO of Fire Blocks – bitcoin and its many altcoin cousins are doing well simply because the standard economy is suffering at the time of writing. He mentions:
The explosion in cryptocurrencies is a consequence of the economic environment.
He has also commented that many of these currencies are doing well thanks to a growing interest in stable currencies. Assets like Tether and Paxos – which are all backed by the U.S. dollar or other fiat currencies – have really pushed standard cryptocurrencies up the financial ladder, and he thinks that the introduction of Libra – Facebook’s cryptocurrency – could also help bitcoin and its “digital friends” boost forward even more.
Don’t Just Focus on a Single Asset!
But Brad Garlinghouse – CEO of Ripple – also thinks that these altcoins are doing well because many people now see bitcoin as too common. He says:
The one thing I think you will see more and more of… is people understanding that when you only invest in one asset, you have concentration risk.
In other words, simply investing in a single asset is not a good idea in that there is no diversification. Therefore, if that asset ever suffers or goes down in price, one’s portfolio is at risk of being wiped out completely, whereas adding some flavor and versatility to one’s portfolio can potentially increase its stability.