Altcoins in Trouble? 5 Reasons Traders Stay Away
After initial enthusiasm, investors and traders are becoming more skeptical of altcoins, as prices sink to new yearly lows.
Altcoins have always been more volatile. For a short time period, newly created assets created immense gains, with appreciations of 1,000 or even 10,000 times happening within weeks or even days.
But in 2019, altcoins have lost their luster - and may even be considered a no-go asset, in most cases. Volumes have continued to decrease, and with a few exceptions, the altcoin market is on the decline. Altcoin price dominance has returned to levels from before the big rally in 2017, while the Bitcoin (BTC) market cap dominance is now above 70%, once again establishing a more traditional ratio between BTC and altcoins.
Here are the five reasons to be careful about altcoins:
It has happened before: In the past, new altcoin projects were all the rage. But now, PandaCoin and Namecoin are largely forgotten.
The entire family of anonymous coins is now mostly defunct, with only Monero (XMR) and Bytecoin (BCN) the remnants of a mass movement of asset creation. Anonymous coins like XMR could be created through a simple tool, much like Ethereum (ETH) tokens. Since new altcoins and tokens come in cycles, it is possible that the last batch of coins has simply run its course.
Lowered volumes: For most altcoins, a mix of delistings, as well as lowered interest has led to almost negligible trading volumes. Only a handful of coins receive inflows from Tether (USDT) markets, and those coins manage to keep some of the gains for 2019.
Other coins and tokens have lost another 90% of their value since the summer of 2018 when altcoins were still going strong with a mid-year rally. But in 2019, the much-awaited altcoin season never really arrived, leaving most assets reeling.
Stricter regulations: For years, the crypto market was a free-for-all. This allowed the creation of coins and tokens with extremely creative economic models. But regulators started to take notice, and go after assets that could be considered unregistered securities. Exchanges quickly took notice of the worsening climate and started pruning their selection of altcoins. The loss of interest from Korean investors also hurt some of the coins that previously enjoyed rather active trading at a premium.
BTC needs to rally more: All eyes are on the price of BTC, which is still at a crossroads and yet to go through a dramatic rally. If this happens, some altcoins may also spark optimism and appreciate on the back of BTC. But as the leading coin struggles with the $10,000 tier, there is enough uncertainty that makes buyers even more reluctant to touch altcoins.
Trader profiles changed: In the past, there have been periods of hype that attracted new enthusiasts into the crypto space. But as search engine statistics show, the wider public is not so interested. Now, crypto space is made mostly of insiders, and they are more skeptical of big-scale promises. Only the best projects manage to survive, and investment is much more cautious.
After a very turbulent period, thousands of projects showed that they took longer to build a product, or never intended to. Big-profile scams also pointed to dangers inherent to new, untested networks and assets, so the image of altcoins and tokens was even more tarnished. In the meantime, BTC is gaining wider acceptance in mainstream finance, further making the case that it is a relatively more reliable asset with the longest-running track record in crypto space.