Several versions of "racer" graphs or bar chart race graphs are available to watch on YouTube. Bar chart race graphs shows the percentage of total market capitalization (dominance) in the cryptocurrency market.
The video shows the top cryptocurrencies and their changing market cap and dominance position over time. For a typical example, see:
As mesmerizing as these types of videos are visually to watch (I found myself waiting for my favourite altcoin to appear on the graph), more importantly what can we learn from these racer graphs about future trends in cryptocurrencies.
Bitcoin is still King (for now)
Price is a measure of bitcoin’s popularity while dominance measures bitcoin's popularity relative to other cryptocurrencies. Bitcoin dominance has ranged from 32.8% (Jan 2018) to 96.6% (November 2013). The racer graph shows bitoin since its inception has been, by a wide margin, both a speculative asset and store of value coin. Although not a predictor of future price the sentiment indicators are recursive. It is the main reason people continue to buy bitcoin because of its previous strength. The sentiment to buy bitcoin in the future will remain for various reasons (eg. liquidity, a derivatives market, listing on all exchanges, ability to buy bitcoin at bitcoin automatic tellers or with fiat or credit cards). Bitcoin's dominance makes it an easy choice for anyone wondering what coin to buy for a long term hold.
The infrastructure for widespread digital currency as a new asset class has continued unabated. Some believe that alternative blockchain and cryptocurrencies may eclipse bitcoin. The Ethereum network has potential at a functional level to eventually surpass Bitcoin protocol.
Cryptocurrency infrastructure continues to build over time
First, such a graph shows that cryptocurrency is not just a fad or pyramid scheme. The growth in market cap alone shows that in just over 5 years the interest in digital currency has grown from essentially zero to over 200 billion. The unstated and unseen message is that an incredible amount of infrastructure and work is being (and continues to be) done as the cryptocurrency space continues to develop. Any one who says there is "no future" in digital currency is either uninformed or has not been paying attention to the incredible amount of work that is ongoing.
The increasing development of decentralized finance projects throughout 2019 shows that cryptocurrency is catching the eye of bigger institutional players who are interested in cryptocurrency for payment and transfer functions.
Second, looking at the market cap trend over time we note the following trend. The total global market capitalization or collective market cap fluctuates. As of January 2020 the total market cap is again back over $210 billion (Bitcoin’s market cap is $122 billion with its dominance is at 57.7%). If we assume a conservative "general" trend of continued infrastructure and market capitalization with higher lows for the next three years then the extrapolation shows a total market cap nearing $400 billion dollars with a dominance by bitcoin.
Many altcoins with initial promise and great use cases disappear
One of the notable conclusions from the bar chart racer graphs is that very few of the top 20 coins have lasting "staying power". Many coins introduced climb and show great promise but fade after a few years. The lack of mass adoption of the token or the lack of funding after initial capital raises cause the projects to lose momentum. Regardless of how good an idea behind the project is, it takes a skilled development team, a widespread community of users supporting the project, and ongoing developments to sustain cryptocurrencies.
Looking at the racer graph in mid-2016 shows bitcoin, ethereum, ripple, litecoin, stellar, dash, doge, monero and tether were the top coins.
Three years later the racer graph in mid-2019 shows bitcoin, ether, ripple, stellar, litecoin, bitcoin cash, bitcoin sv, dash, neo, maker and binance as the top cryptocurrencies for market cap.
Notable in 2019 was the first appearance of an exchange coin with Binance (BNB) near the top. Binance is a global cryptocurrency exchange platform trading more than 100 cryptocurrencies. In 2018 Binance became the biggest cryptocurrency exchange in the world in terms of trading volume and its BNB coin skyrocketed in to the top ranks. Binance coin shows the increasing adoption of cryptocurrencies by mainstream investors who want to trade digital assets.
Similarly, we had the first appearance in 2019 of a decentralized finance (de-fi) coin called Maker (Maker-Dao) as a top coin by its market capitalization. Maker-Dao is a blockchain-based lending platform and the first decentralized stablecoin (DAI) built on Ethereum. Again, it shows the increasing functionality of the Ethereum network and the growth of infrastructure surrounding cryptocurrencies.
Take aways from Race graphs
1. Don't fall in love with your altcoins, many are risky investments and will fail. Stay aware of your altcoin's community, development team, finances, and roadmap. Be ready to pivot in to a stable coin or another coin if your beloved coin accumulates red flags.
2. Infrastructure and development of the crypto-space continues. Digital cash and blockchain technology are being integrated and adopted by financial systems.
3. Buy, hold and invest in coins that continually stay near the top of the racer graphs. These projects have proven "staying power" (eg. bitcoin, ethereum, ripple, stellar, cardano, litecoin, neo).
4. Bitcoin and Ethereum are good choices for those seeking less risky cryptocurrencies to invest in.
5. Bitcoin dominance is undeniable and it remains the eminent cryptocurrency. Bitcoin remains a strong buy.
6. Ethereum and its dApps continue to add functionality and use. Other projects like energi and wax protocol are attempting to duplicate the ethereum network. Ethereum remains a strong buy.
7. Many decentralized finance projects that bring increased functionality and interoperability (eg Chainlink, Synthetix, Maker-Dao, Enigma, Algorand, WAX protocol dApps) will likely perform exceptionally well throughout 2020 and beyond.
cryptos... won't stop, can't stop....
written by Cryptomoose
My thoughts are not investment advice, do your own due diligence and invest wisely.
