Altcoin Apocalypse? Bitcoin Reversal Triggers Crypto Bloodbath

Bitcoin’s sharp correction Thursday hastened a market-wide collapse in cryptocurrencies, with the majors posting double-digit losses across the board. Not only has altcoin season failed to materialize, alternative assets are quickly losing relevance in a market that is increasingly dominated by bitcoin.

Cryptos See Market-Wide Correction

As bitcoin sold off $2,000 peak-to-trough, altcoins and tokens have experienced even more debilitating declines. At the time of writing early Thursday, 47 of the top 50 cryptocurrencies by market cap were trading firmly in negative territory.

In the last 24 hours, bitcoin’s market capitalization has declined by roughly $24 billion. Altcoins and tokens have shed a combined $14 billion over the same period. All said, the crypto market cap as a whole plunged from around $356 billion to $317 billion on Thursday.

As the following chart illustrates, most of the top cryptocurrencies were down double digits Thursday.

EOS was the biggest loser percentage-wise, falling 20.4% to $4.64.

Ethereum plunged 12.1% to $271.69. The developer coin is off 24% from its most recent high.

XRP fell 14.7% to $0.3358 after failing to break above the psychological $0.4000 level. Read more here.

Litecoin, the fourth-largest cryptocurrency by market cap, declined 13.6% to $102.53.

Bitcoin cash sold off 17.5% to $343.82.

Bitcoin Dominance Threatens Altcoins

Despite losing more than $20 billion in market cap, bitcoin’s leadership pace of the broader cryptocurrency space increased on Thursday. Bitcoin’s dominance rate, which reflects the percentage of total crypto holdings devoted to BTC, swelled to 65.6%, the highest since April 2017.

Bitcoin dominance has increased ten percentage points over the past month and 15 percentage points since the start of 2019.

Bitcoin’s growing dominance reflects declining interest in altcoins and tokens – at least, relative to the original cryptocurrency. The trend runs contrary to what many in the crypto community want to see – namely, a market where alternative assets trade independently of bitcoin. As Hacked reported back in March, “greater price independence between and among cryptoassets is a bellwether for a more sustainable market.”

The so-called ‘decoupling effect’ was observed during the height of the crypto bull market in late 2017 and early 2018. When crypto markets peaked near $840 billion in January 2018, bitcoin’s dominance was around a third.

Still relevant: Five Reasons Why Bitcoin Is Surging

Several altcoins have performed on-par with bitcoin this year, including Litecoin, bitcoin cash and EOS. Smaller caps like Tezos, Basic Attention Token, Cosmos and Chainlink have also enjoyed their time in the sun. But taken as a whole, the altcoin sphere isn’t as appealing as it was during the previous bull market. Part of the problem is that many of these projects failed to deliver following their highly-touted initial coin offering (ICO).

Bitcoin, on the other hand, continues to demonstrate its utility as a non-correlated, asymmetric return asset. Smart money has been accumulating it since at least December and the vast majority of BTC in circulation has not moved in the last 12-16 months. Institutional onramps and custody services are being developed to serve a new class of customers who want to diversify into an alternative store-of-value asset.

Read why bitcoin maximalism is on the rise

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. Charts via CoinMarketCap.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi