How Altcoins Like Ether And USDC Took Over More And More Of The Crypto Market

The entire global cryptocurrency
market was worth $1.6 trillion by the end of July 2021. That's
more than six times what the crypto market was worth in July
of 2020. And it became very trendy on
Wall Street to kind of trade cryptocurrencies. And I think
that's really what the last 18 months have been about, that
hype cycle. Bitcoin is now old money. I
mean, you look at all of these altcoins. Now I own ethereum. I feel like
you have to have exposure to bitcoin, just like you have to
have exposure to gold. It's a good reminder that the
story is bigger than just bitcoin. In fact, the current number of
altcoins clocks in at more than 11,000 and counting. This
includes ether, USDC, and of course, dogecoin. When Elon Musk showed dogecoin
on Saturday Night Live, I mean, that was the peak right there.
You don't get any more hype than that.

Bitcoin's dominance has fallen
in the last five years. In December of 2016, bitcoin
dominated the crypto market, controlling 96% of the industry.
Now altcoins are taking up a larger and larger share. By the end of July 2021, bitcoin
made up less than half of the global crypto market. Crypto's
renewed attention and volatility has caught the eye of government
officials like U.S. Treasury Secretary Janet Yellen. She's
now pushing for regulators to police digital currencies,
specifically the kind known as stablecoins. But with the number of altcoins
growing in number and value, will it be too little too late? Here's how altcoins work. Altcoins are basically any
cryptocurrency other than bitcoin. Currently, there are
more than 10,000 altcoins in the world. Altcoins are powered by
blockchains.

They can be traded, held as a store of value, used
to pay for transaction fees or incentivize miners. Bitcoin, the first
cryptocurrency laid out the technological groundwork for
many altcoins. Nicknamed digital gold, bitcoin now primarily gets
thought of as a store of value. Today the price of bitcoin
influences the price of other altcoins, but other coins and
their blockchains offer additional capabilities and
flexibility, hence the need for altcoins. This is known as bitcoin
maximalism. Bitcoin maximalism basically
states that bitcoin is the only blockchain that actually has
value. And there's no use for blockchain other than bitcoin. Most of the coins out there are
either worthless or should be worthless, or don't bring very
much utility to the table. But you know, 95% that of let's say,
10-20,000 coins that are out there, that means that there are
thousands of coins that do have value and do have utility.

Determining a coin's usefulness
depends on a number of factors. So we asked a developer, a
crypto trading exchange, a crypto asset manager, and an
investor what they look for. Developers in general are
extremely focused on blockchain technology. We talk directly to customers.
We try to understand what they've been interested in and
what they've seen. And then we go through our own internal process. What we look at is actually the
technical capability, we try to understand the team and try to
understand, you know, what's actually live on the project. We
try to make sure that the technology is actually working. The first mistake that people
make is that they get hyper focused on the technology, Which blockchain is a little bit
faster than the other one? Which one is more efficient, which one
scales better? And they forget that in this
market, size really does matter.

Don't get over focused on the
technology. The other big mistake, which is
the flip side of this coin, is don't assume that we're at the
end of crypto history, and that what exists right now will be
what exists in the future. Volumes are an excellent
indication of where the markets heading and how big a project
is. The other metric that I would say not to discount is
social metrics. We think about cryptocurrencies,
they're not companies, right? They're not currencies. They're
actually, what they are is networks at the end of the day.
The best way to evaluate a network is how many people are
talking about it. It's important to think of these
crypto assets as backed by technology. And each technology
can be optimized to be really good at one or another thing.

In
the same way that Microsoft is a software company optimized to be
good at one thing, and Salesforce is a software company
optimized to do another thing. Crypto assets can be divided
into various categories. A store value — so the place to
hold your money. They can be used in smart
contracts, which is an agreement between buyer and seller. There are utility tokens. And then there's a specific
subset of cryptocurrencies called stable coins, which have
a value pegged to a real world asset such as a fiat currency
like the US dollar or a commodity like gold. We're going to look at a few
popular players in these categories. The Ethereum blockchain often
gets described as a world supercomputer.

Its ability to
run decentralized applications and deploy smart contracts makes
it favorable to developers like Austin Bunsen. So Bitcoin is like really good
at this very, very one very, very simple thing which is like
being decentralized censorship resistant money. Ethereum, on
the other hand, is very focused on being a general computation
platform that any developer can build on. Ethereum is growing so quickly
that it received an upgrade in August 2021 to help it keep pace
with miners and transactions alike. Within Ethereum there are
cryptocurrencies like Polygon which assists with the
blockchain's congestion and Uniswap, a popular decentralized
crypto exchange. There's also Polkadot, a rival to the
Ethereum blockchain. Within the fast-growing arena of
decentralized finance, stablecoins are considered a
volatile-free asset because their value is connected to
currencies or other reserve assets. Examples of stablecoins include
USDC and tether, both of which are pegged to the U.S. dollar. Then there are speculative
tokens built on technology that doesn't have a fundamental use
case or project.

The most well known is dogecoin, which was
branded after a viral dog meme from years ago. It's important to note that the
crypto industry remains rife with scams. Popular tactics include 'pump
and dump' schemes, where investors plant false news in
order to push prices higher. There's also the 'rug pull'.
That's when founders abandon a project take the money raised
and then disappear. When Wall Street institutions
like JPMorgan and Goldman Sachs piled into bitcoin and other
cryptocurrencies, after years of avoiding them, the news caused
crypto prices to soar.

18 months ago, this was still
primarily a grassroots retail phenomenon with crypto owned
mostly by individual investors. Beginning shortly after the
pandemic started, beginning around May or so, we started to
see institutions move into crypto in a major way. Not to be deterred at the retail
investors who were drawn to meme stocks, like GameStop also
invested in digital currencies like dogecoin. We've had millions of customers
sign up, over 3 million since the beginning of the year.
Really a lot of active interest and growth with bitcoin and
beyond. Lots more cryptocurrencies
polkadot being one, ethereum two and staking capabilities there. It's not just about trading and
buying and selling anymore. There are a lot more activities
that you can take.

Crypto's popularity from retail
investors and Wall Street has picked up the attention of
government officials, making it a prime target for regulation. Conversations about crypto
regulation go back as early as 2013. But governments at the
time didn't really understand the technology and the crypto
market was tiny compared to now. Since then, the government's
understanding of crypto has vastly improved. In July 2021, Treasury Secretary
Janet Yellen hinted at regulating stablecoins. Central banks see the growing
asset as a threat to financial stability. Then in August 2021,
SEC chair Gary Gensler called for tougher regulation to
protect investors. The regulators are probably
going to get what they want, in most respects. And what the regulators want, in
my experience, is not to crack down and eliminate this
industry, not to strangle it in its crib.

But they do have
strict requirements for how companies like Kraken, Coinbase,
Binance, Bitstamp and Gemini, and all the rest, treat their
customers how we mitigate risks. I think we're going to see more
development of that. Crypto projects like Ethereum
and Cardano have moved to countries like Malta and
Switzerland, areas with crypto-friendly regulation.
Advocates warn this trend could result in the U.S. missing out
on a huge opportunity. More and clearer regulation
could be the single biggest driver of the next bull market
of crypto.

The way to evaluate whether the new regulations
which are definitely coming are going to help or hurt crypto is
this. If these new regulations put crypto on par with the
traditional financial system, crypto's going to win because
the underlying technology is more efficient. It's more inclusive, it's more
innovative, it's newer, it's faster, and better..

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