In my last discussion about bitcoin and the cryptocurrencies, I mentioned the very real possibility of BTC hitting $40,000. To make a long story short, mere emotions based on the fear of missing out, or FOMO, drove prices to nearly $20,000. In the next run up, FOMO will not be the decisive factor: the general public has already established the precedent for $20,000 bitcoin. But in the subsequent run up, I’d urge people to consider the altcoins.
Now let me back up just a minute. Altcoins, or alternative cryptocurrencies, number now in the thousands. Surely, not all of them will survive. Indeed, I’d say a majority of these alternative takes on the blockchain markets will evaporate. While the mainstream has steadily accepted the concept of virtual currencies, it’s still a nascent sector. A true wild west of the broader financial machinery, this vibrancy will need time to settle down.
During that process, we’ll see a purge of altcoins, or what many people in the digital community refer to as s—tcoins: I’ll let you figure out what that means. But despite criticisms of most altcoins, I believe that they’ll rise significantly higher – if only temporarily – in this rally. Again, it comes down to the same reason: human psychology.
“Expensive” Bitcoin Drives the Case for Altcoins
A frequent criticism of bitcoin among novice crypto investor is its price tag. At a few hundred dollars shy of $13,000 – at least at time of writing – people view BTC as expensive.
Of course, expensive is a relative term to individual wealth and financial capabilities. It’s also relative to the true potential value of the target asset. In bitcoin’s case, if the worldwide public eschews fiat currencies for the blockchain, we can see a dramatic run.
Keep in mind that bitcoin’s supply is limited to 21 million units. That’s a small ripple in the vast Pacific Ocean.
Once people recognize the fundamental importance of the blockchain and virtual currencies, they’ll no doubt jump on the bandwagon. But a problem exists: no matter how great of a case you make, bitcoin will remain expensive for most prospective buyers. That’s why altcoins make sense.
At a little over $300, bitcoin rival ethereum makes a lot of sense. It also has more provenance because we know the team behind it. On the other hand, with bitcoin, who really knows its true backstory and inception?
You also have alternatives like Ripple. At under 50 cents, you can support a negative case that the price is too low, like a penny stock. However, its support from mainstream institutions provides confidence for investors on the fence.
To put it all together, human psychology will drive bitcoin to fresh all-time highs. But in its run up, it will take the altcoin complex with it.