With bitcoin’s block reward “halving” set to take place in May, there’s a lot of speculation — not to mention excitement — about the possibility of major rally across the entire cryptocurrency market. After all, cryptocurrency tokens of all kinds began their climb to all-time highs in the months after the 2016 halving. Additional factors, like growing cryptocurrency global adoption and the increased attention on the market generated by new projects like Facebook’s Libra token, have created an environment where the alt-coin market could explode in value.
But there’s also plenty of reason to be skeptical. Here are three reasons to be wary of the hype about a 2020 alt-coin rally.
1. Market domination by a handful of major tokens. The most common definition of an “alt-coin” is “any cryptocurrency that isn’t bitcoin,” but that description has been shifting in recent years. Ethereum, for instance, supports an entire constellation of DApps, ERC-20 tokens, and smart contract platforms. Is ETH an alt-coin, or has it outgrown that definition? Ripple Lab’s XRP token, on the other hand, is simply the public-facing side of its much larger, banking-focused blockchain. These tokens will likely survive in some form no matter what happens to the cryptocurrency market — even a catastrophic long-term price collapse — but what about the hundreds of other alt-coins? Even established tokens like Litecoin (LTC), Bitcoin Cash (BCH), and Monero (XMR) have struggled to maintain their value over the last two years, and it isn’t obvious that a cryptocurrency price rally would do much to reverse that trend.
2. Increasing regulation on cryptocurrencies. Until just the last few years, central banks, financial regulators, and lawmakers have been largely dismissive of the idea that cryptocurrencies could have a serious impact on the world’s economy. Starting in mid-2019, that attitude began to change. Why? Facebook’s planned launch of its Libra “stablecoin.” Libra would instantly turn the social media giant into one of the world’s largest banks — effectively issuing its own currency — and it would be largely unchecked by existing finance laws. As lawmakers and regulators scramble to catch up, some central banks — notably the People’s Bank of China — are now looking to beat cryptocurrency at its own game by developing their own state-backed digital currencies. For alt-coins, this increased regulation and state-level competition could mean the beginning of the end.
3. Declining interest in established tokens. By most estimates, there are around 5,000 actively traded alt-coins in the cryptocurrency market. A surprising number of these are so-called “zombie tokens,” which are still being mined and traded even after being abandoned by their original developers. Even major tokens, such as Litecoin, Zcash, and Bitcoin Cash have struggled to maintain a large base of active developers as overall alt-coin prices slowly decline. Excluding BTC, the overall market cap for all cryptocurrency has also declined tremendously in recent years, falling from $500 billion at the 2017 peak to around $60 billion today. While a 2020 price rally could help to reverse this trend, it’s not clear that new investment would be directed to older, less-supported projects.
Looking to earn some cryptocurrency for yourself? Learn how to earn alt-coins by working as social proof marketer at CoinClaim.io.