The Altcoin Market – A Critical Analysis Heading into 2020

The end of the decade is steadily encroaching so there is no better time to reflect back at the altcoin market over the past few years. The highs, the lows, the in between. And in doing so peak behind the curtain about what might happen in 2020 and beyond.

Graph Showing Altcoin Market Capitalization from 2017 to 2019
Altcoin Market Capitalization 2017 to Today

2017

Everyone remembers the glorious cryptocurrency market of 2017. It’s how many of us originally found out about Bitcoin and cryptocurrency. A time of complete financial euphoria. A period when it was harder to lose money than it was to make it. Waking up in the morning and checking Blockfolio to find that your portfolio was up 100% overnight. Coins going up 300% in an hour because they got listed on some obscure Korean exchange. People selling Binance accounts for 3000$ when they closed registrations. Telling your family to go all in over the dinner table at Christmas or Thanksgiving. Cryptocurrency plastered on the front page of the New York Times. The shenanigans with John McAfee pump and dumps. The list goes on and on.

Two men wearing Ethereum and Bitcoin  Christmas jumpers with the New York Times Heading "Everyones Getting Hilariously Rich and You're Not."
New York Times Headline

2018

If 2017 was the year of euphoria, 2018 was the year of complete and utter despair. The year started off strong with the altcoin market continuing to pump to new all time highs. However, after January it took a turn for the worst.

Graph of Altcoin Market Capitalization in a Downtrend
Altcoin Market Capitalization 2017 to 2018

The first emotion in cryptocurrency circles was complacency. “This is just a correction before we head for new all time highs” was a popular phrase. The perpetual green candles on the price charts had left people in a state of delusion unable to contemplate a reality where prices didn’t go up. The next emotion was worry. “What happens if this keeps going down?” This was closely followed by denial, then panic, anger and then finally capitulation.

Though Bitcoin dropped from 20,000$ to 3000$ the altcoin market was hit even worse. The selling seemed unstoppable. The XRPUSD chart sums it up best. A drop from a high of $3.30 to $0.22. But you can put in any altcoin here and get very similar results.

Graph Showing the Price of XRP rising Sharply and then Declining
XRPUSD 2017 to Today

2019

This brings us up to the current year. Bitcoin started off the year strong with its price surge from 3000$ up to just under 14,000$. There was again a sense of skeptical optimism. However Bitcoin at the time of writing has fallen 50% from its local highs and the sense of dread is slowly creeping back.

Altcoins on the other hand were somewhat lagging behind. Some altcoin markets had a great start to the year. For example the exchange tokens such as BNB, LEO, and Huobi token all had a sharp increase in price before correcting. Coins like Tezos and Chainlink also went on their own runs.

Chainlink Chart showing its rise since the start of 2019
Chainlink/BTC Since the Start of the Year

However a surge in the altcoin market as a whole has not occurred and many altcoins continue to bleed and sell off.

Table Showing the loss of value in Altcoins since their all time high
Altcoin Prices Since All Time High

2020 and Beyond

By looking at trends in these recent years we can speculate on what might occur in the altcoin market in future years. I will put forward some hypothesis arguing in favor and against the probability of future altcoin bull runs like 2017.

Why There Won’t be any Future Bullruns

The Rise of Derivatives Exchanges

You may ask what the rise of derivatives of exchanges has to do with the altcoin market. But lets look at the actual nature of altcoin markets. I think its a fair assessment to make that altcoin bull markets aren’t generated because there is genuine value in certain altcoins but rather they are created based around pure speculation and greed. People only buy altcoins because they want to get rich quick.

Now the rise of crypto derivatives exchanges such as BitMEX, FTX, and BTSE to name a few fulfills the exact same role. A way to get rich quick. These exchanges offer up to 100x leverage so now instead of buying altcoins people can simply gamble with 100x leverage on the price of Bitcoin.

There is no Value in Altcoins

This is perhaps the most simple of our explanations. Investors see little to no value in altcoins. Lets be honest with ourselves the altcoin market is ridden with projects that are going nowhere and have little value propositions. Sure, there may be some projects which check all the boxes. But lets ask ourselves is there really over 50 billion dollars of value in the altcoin market?

Lack of Retail Interest

The altcoin market is primarily driven by retail traders if there is no retail interest it is unlikely that altcoins will go up. If we look at current Google trends we see that there is very little search traffic for Bitcoin at the moment in comparison to 2017. If however Bitcoin goes on another bull run this may attract retail investors back to the space.

Google Trends graph showing decline in searches for Bitcoin
Google Search Trends for Bitcoin

Why There Will be Future Bullruns

Human Greed

A bet against alt coin bull runs is a bet against humans ever being greedy and FOMOing again. I for one am never going to bet against that.

The Actual use of Cryptocurrency

If there is one thing for sure that will cause altcoins to go up is the actual use of coins and networks. Using these networks will cause increased demands for coins thus increasing the price. If people stopped using the Euro or Dollar tomorrow would they still be valuable? Probably not and Cryptocurrency is the same.

There has been increased interest in the use of cryptocurrencies especially in the corporate world if this trend can continue and coins can feed this demand then prices will rise.

Increased Regulation Certainty

Altcoins have always been in a grey area in terms of regulation in a number of juristicions namely China and the U.S. The U.S has remained rather strict in certain areas. However the president of China Xi Jingping has began to advocate for blockchain technology. If regulation can open up in these areas it may allow larger players to get involved.

In Conclusion

Altcoins have been around for quite a while at this stage this isn’t their first long term bear market and I doubt it will be their last. The future of the ‘Alt Season’ phenomenon is currently uncertain, it is anyone’s guess whether we see the likes of 2017 ever again. However I do think altcoins are here to stay.