This has been a significant week in the world of cryptocurrency. Bitcoin, going from historic high to historic high, broke the $3,000 mark for the first time. Perhaps even more notably, Ethereum skyrocketed to $350 and beyond, and now has overtaken a third of Bitcoin’s market cap.
Are we witnessing “The Flippening,” that mythic event long prophesied, in which Ethereum becomes the world’s leading cryptocurrency and Bitcoin leaves the stage? We just may be witnessing the beginning of it, but ETH has a long way to go.
That should not blind us to how far it’s come. BTC was at $975 on New Year’s Day 2017. It’s tripled in value. ETH was at .95 cents. It’s risen thirty-five times in value, and is likely to break $400 in days to come.
Can we assume that that rise will be sustainable, though? Bitcoin managed it; presumably ETH can too. But investing has a few characteristic laws that we ignore in the heat of the moment: the rule that what goes up, must come down; the rule that when investments become profitable, profit-takers eventually capitalize their gains, and sell. Bitcoin has already dropped $250 in what may be the start of a deepening correction. ETH’s time will come.
The question is one of overall trends. Will the inevitable Ethereum correction be temporary, or will ETH follow Bitcoin into four figures?
CoinDesk‘s State of Blockchain Q1 2017 study has some material that suggests a fundamental shift in market dynamics may be on the horizon.
It seems positive investor views on Bitcoin are almost evenly split with negative, while Ethereum investors are 93% positive. Yet that hasn’t stopped Bitcoin from tripling in value. And the fact that most Ethereum is bought with Bitcoin is not as significant as it seems: most investors convert their currencies to Bitcoin before purchasing alternatives, a fact that by itself argues for the persistence of Bitcoin.
In a way, the new developments change nothing. Both cryptocurrencies are excellent investments, indeed the leading ones, and any sane portfolio will contain a good deal of both. The epic battle between the two for market dominance has yet to be fought.
But there are a couple of interesting grace notes. Am I the only one who’s noticed that Ethereum’s sudden surge follows directly on the heels of developer Vitalik Buterin’s meeting with Vladimir Putin?
Market manipulation is no stranger to the cryptocurrency market: are we witnessing not a Flippening so much as a Trumpening? Russia may or may not be providing some shadowy assistance to Ethereum, but the possibility of a major player like Russia entering the field, like the possibility of a passionately anti-Trump media dragging Ethereum into its vocally anti-Russian agenda, may complicate the supposedly seamless rise of Ethereum in interesting ways.
Meanwhile, what of the alt coins? Bitcoin remains nearly half the cryptocurrency market, and when it surfaces to the top, it does so like Moby Dick: the surrounding water level declines profoundly. Ethereum (long viewed as an alt coin albeit the prince of alt coins) has not been entirely isolated from this effect.
But this time, as Bitcoin has reached historic heights time after time, so has Ethereum. The flow of funds to both has left the surrounding investments a desert. Coins as interesting and promising as ARK, Verge, Stratis, Sia and BAT have taken a beating Sonny Liston could have dished out. Former stars like Ripple and Digibytes are descending the price stairs as grotesquely as Gloria Swanson in Sunset Boulevard. Is it the end?
Well, no. Again, there are rules. When prices descend too, bargain hunters descend too. Just as Bitcoin and Ethereum will correct, so the alts will ascend too, and very likely to greater heights than before.
Those who expect Ethereum to rise to imperial heights in one seamless ascent and reign unopposed are delusional. In cryptocurrency investing, nothing is secure. ARK and cryptocurrencies yet in the wings are waiting to execute putsches of their own. Yes, every portfolio should be invested in Bitcoin and Ethereum. But now is the time for cannier investors to think in the longer term and look into some of the alt coins cited.
Given the choice between investing the same amount into one Bitcoin or three thousand ARK, I would go with 3,000 ARK. Admittedly, doing so as Bitcoin apparently flourishes and ARK apparently withers is not a joy. But give it time.
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