Bitcoin's Slipping Crypto Dominance

Morning Report: Welcome to 2018. Let’s look at a chart to get things started off on the right foot.

As 2017 came to a close, the biggest story in the world of cryptocurrency and decentralized digital assets wasn’t bitcoin, whose price had fallen and failed to quickly bounce back. Instead, it was the rapid appreciation of XRP, the token of Ripple, an “enterprise blockchain solution for global payments” in its own words.

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Ripple’s massive run pushed the aggregate value of its token above the worth of Ethereum’s ether coin. It was heady stuff.

(There’s ample work out there already tucking into whether or not Ripple’s boom is reasonable; that’s not our goal here and I have no particularly strong perspective either way.)

But something that Ripple did while appreciating greatly was cut bitcoin’s share of the crypto pie. As the following chart from CoinMarketCap shows, bitcoin is nearly back to all-time-lows in regards to its share of the aggregate value of its asset class:

There’s a lot of nuance in the above chart which is missed on a quick glance. But who needs that on New Year’s Day? Instead of digging into details, I wanted to ask a question.

Bitcoin is slow to process transactions that cost quite a lot, a fact that has made its hopes of becoming a leading digital currency seem damp. But bitcoin has held its worth as market sentiment shifted towards viewing it as a store of value; it’s valuable because it’s valuable and thus it has value and may appreciate as people think of it as a valuable thing. Or something like that.

But what might happen if bitcoin falls to a low enough percentage of the crypto market that it’s no longer an obvious store of value in comparison to rival offerings? And then it doesn’t do really much of all that is useful.

Anyway, that’s what I was thinking about last night. Hope you are well and welcome to 2018.