Source/LongHash
Source/LongHash
According to data from Coinmarketcap, as of January 24, 2021, the market price of Bitcoin was reported at US$32,289, a 60.73% increase from US$20,089 at the highest point of the last bull market cycle (January 2018). The second largest digital currency in the world by market value, Ethereum Fang also recently broke through its historical high of 1432 US dollars three years ago. Different from the wealth-creating effect of the digital currency industry created by the "ERC20 crowdfunding" led by Ethereum from 2017 to 2018, the rise in the price of digital currencies dominated by Bitcoin and Ethereum in 2021 is called "institutional cattle", which is in line with 3 Compared with the bull market of years ago, the market structure has changed.
According to data from Coinmarketcap, the prices of Bitcoin, which ranks first by market capitalization, and Ethereum, which ranks second, have both broken through the 2017 bull market highs. However, unlike the general rise in 2017, the price rises of other mainstream digital currencies are not synchronized this time, but more reflect changes in the fundamentals of each project.
The total market value of digital currencies (except Bitcoin) has not yet broken through the previous high
According to data from Coinmarketcap, as of January 20, the total market value of digital currencies other than Bitcoin was approximately US$356.2 billion, a drop of 33.9% from the historical high of US$539 billion three years ago, and did not break through the digital currency bull market cycle three years ago market capitalization highs.
In the past year, the market capitalization growth rates of Bitcoin and other digital currencies were about 3.37 times and 3.4 times respectively. The rise of Bitcoin has driven positive market sentiment, and the market value of mainstream digital currencies has also accelerated. Ethereum's market share was reported at 14.08% on January 18, 2021, breaking through a nearly two-year high. As a digital currency ranked second only to Bitcoin in terms of market capitalization, its rising market share is often seen as an indicator of trading competing digital currencies. If this indicator continues to rise, the total market value of digital currencies other than Bitcoin will usher in higher growth.
In contrast, the top 20 digital currencies in the last round of bull market, except for BTC and ETH, have seen their market value shrink sharply. Currently, 9 projects have fallen out of the top 20 list. Among them, the market value of Litecoin has shrunk the least from 3 years ago, about 31%. Due to the lack of substantial technological progress and user ecology, most mainstream digital currencies such as governance tokens of public chains are slowly losing value.
Fundamentals have an increasing impact on prices
As Bitcoin continues to break through previous highs, the prices of most mainstream digital currencies have still failed to recover to the high point of the last round of bull market.
According to calculations, as of January 22, the current price of the top 15 mainstream digital currencies by market value compared with the highest price change rate in the 2017-18 bull market, only BNB, BTC, and LINK three projects broke through the high point of 2017.
Chainlink became the project with the largest price increase, thanks to the landing of Ethereum in the DeFi field. As an indispensable oracle machine in DeFi products, Chainlink is supported by the development community, users, and venture capital institutions (such as Framework Ventures). The rise in the price of BNB is due to the fact that the world's largest digital currency trading platform increases the utility of its tokens through the design of its economic model (token burn), thereby driving up demand. Whether there are users and products has become the real reason behind the price increase.
Most of the digital currency projects born from 2017 to 2018 lost value because there was no real product demand. For example, the market value of the well-known public chain EOS has shrunk by 85% compared with the previous high, and its CTO, well-known developer Daniel Larimer, has also resigned from the team. The old digital currency Ripple used for cross-border payments has also been investigated by the SEC, and its price continued to decline at an accelerated rate.
The entry of external traditional institutions in 2021, such as Wall Street buyers who entered the digital asset market through Greyscale (Grayscale) Trust and institutions that purchased Bitcoin through Coinbase Prime for asset allocation, they preferred Bitcoin as the preferred digital currency. Professional investment institutions in the blockchain field are more inclined to invest in the theme of open finance (DeFi) based on Ethereum and the incubation of the post-public chain ecology. For example, the public chain Polkadot, which will be launched in 2020, currently ranks fourth in market value and is profitable. The governance tokens of DeFi products in the model have also begun to enter the top 20 digital currencies by market value.
As market participants and market infrastructure mature, the cycle iteration of the digital currency sector will accelerate, and projects with good fundamentals will be easier to capture value. In short, the sector dividends from 2017 to 2018 will be difficult to replicate.
LongHash, Use data to understand the blockchain.
