The cryptocurrency business has grown at a staggering tempo. There at the moment are nearly 21,000 completely different cash in existence, throughout a wide range of subsectors. From metaverses to decentralized finance, traders are spoiled for alternative.
However a burning query, particularly amongst crypto skeptics, is that this: Are there too many cryptocurrencies? We have repeatedly seen how new altcoins may be created within the blink of a watch. Tokens popped up hours after Will Smith slapped Chris Rock on the Oscars — pumping and dumping on low liquidity. And following the dying of Queen Elizabeth, the markets had been flooded by a flurry of “memecoins” bearing her title. Some critics felt this was in poor style and argued it was “a nasty search for crypto.”
Regardless of the proliferation of hundreds of cryptocurrencies — some with names impressed by main cash — Bitcoin and Ethereum proceed to dominate. Mixed, the valuations of those two digital belongings command a 58.2% share of your complete market. All of this leaves altcoins battling for a a lot smaller piece of the pie.
Is alternative factor?
Let’s start by discussing the arguments in favor of this overwhelming assortment of cryptocurrencies.
Whereas Bitcoin and Ether are universally acknowledged and accepted, it is truthful to say that many blockchains and crypto initiatives would like to have their very own tokens. In some circumstances, it is a necessity too — soccer fan tokens would not make sense except the likes of Manchester Metropolis and Paris Saint-Germain had been capable of provide their very own digital belongings.
Stablecoins are one other group of cryptocurrencies the place a wide range of choices is vital. Whereas belongings pegged to the U.S. greenback dominate the panorama, some traders choose to make use of stablecoins denominated of their native fiat forex, similar to euro or pound. And given how some stablecoin issuers have confronted uncomfortable questions on whether or not the cash in circulation are correctly backed by onerous forex in reserve, the variability on provide empowers traders with the power to carry out due diligence and discover an asset that matches their urge for food for threat.
The cryptocurrency market is considerably just like a superstore. Inside the most important retailers, you possibly can come throughout 10 forms of the identical cereal — and numerous types of ketchup. However every has a unique worth level and a worth proposition. Specialists inside these shops could have additionally carried out style exams and security checks earlier than permitting the merchandise on cabinets.
You would argue that it is a related story on the subject of crypto exchanges. Buying and selling platforms similar to HitBTC have a rigorous itemizing course of to make sure that all well-established cryptocurrencies are provided to its prospects — in addition to new tokens that present potential. Given what number of digital belongings at the moment are in existence, this may generally really feel like discovering a needle in a haystack.
In fact, there’s two sides to each coin. With hundreds of various altcoins on provide, the will to repeatedly create new cryptocurrencies arguably results in additional fragmentation within the business. A undertaking’s insistence that solely its native token will likely be accepted can add prices for customers too, as a result of they’re going to have to make conversions from better-known cryptos — and pay buying and selling charges alongside the way in which.
It is not possible to think about a world the place Gmail customers may solely ship emails to others who’ve a Gmail account, with Yahoo and Outlook additionally working as walled gardens. However this appears to have turn into the established order within the crypto business — and though efforts are being made to spice up cross-chain communication and forge bridges between blockchains, there’s nonetheless lots of work to be finished. These bridges can even undergo unlucky safety vulnerabilities, as we noticed with the Ronin hack again in March.
And on the difficulty of whether or not there are too many cryptocurrencies, some critics argue this proves how ineffectual the market is. What is the level of getting Bitcoin, which has a set circulating provide of 21 million, when there’s an infinite provide of different cash?
What the long run appears to be like like
Figures from 99 Bitcoins suggest that there are greater than 1,700 useless cash — a veritable graveyard of failed digital belongings that undergo from inactive growth, low buying and selling quantity, poor on-line presence, a scarcity of listings on main exchanges, or all 4. Given we’re at the moment in a bear market, it is nearly sure this determine will rise within the months forward.
It is value remembering that the crypto bull run of 2021 can draw parallels with the dotcom growth 20 years earlier. Again within the early 2000s, frenzied exercise noticed an explosion within the variety of web firms buying and selling on the inventory market, and plenty of of them boasted sky-high valuations. Lots of them ended up going bust, together with Pets.com and Boo.com.
In a latest report, KPMG warned that cryptocurrencies missing “clear and robust worth propositions” may additionally find yourself dying out within the subsequent few months, however added: “That would truly be fairly wholesome from an ecosystem standpoint as a result of it’s going to clear away a number of the mess that was created within the euphoria of a bull market. The most effective firms would be the ones that survive.”
And that is the opposite lesson that may be drawn from the bull run — regardless of how brutal or extended a bear market is, some cryptocurrencies will survive and thrive. This additionally stays a massively experimental expertise, and there are sure to be failures alongside the way in which.
HitBTC argues that the crypto markets are nonetheless removed from maturity. It describes itself as one of many pioneers of the trade market, given the way it launched in 2013. The corporate says safety, ease of use and reliability are high priorities — alongside aggressive charges and a secure infrastructure. It now lists greater than 1,000 cryptocurrencies, and likewise affords staking and futures.
The crypto business is progressive, and thrilling use circumstances are frequently rising for digital belongings. Due to this, the variety of new cryptocurrencies in existence is unlikely to sluggish anytime quickly. This implies it is right down to traders to carry out detailed due diligence on which cash to spend money on — and exchanges should play an instrumental function in making certain that they solely listing credible cash that add worth to the ecosystem.
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