Altcoins Set for Historically Poor Returns in 2019By Kyle Torpey
It's no secret that 2019 hasn't been the best year for the altcoin market. While many of the top altcoins have performed well against the US dollar, it's nothing but a sea of red when these alternative cryptocurrencies are measured in Bitcoin (BTC) terms.
But is this the worst year that the altcoin market has ever seen? Well, it depends on the criteria. When looking at the price data associated with some of the most popular, longstanding altcoins on the market, arguments could be made for both 2018 and 2019.
Measuring the Altcoin Market's Historically Bad 2019
Measuring the altcoin market as a whole can be a somewhat difficult task, as new coins come and go from the minds of cryptocurrency enthusiasts and traders on what seems like a monthly basis. Below, we've charted some of the more popular cryptocurrencies that have been around for at least a few years. These charted price movements are denominated in BTC.
Of course, "popular" is a relative term when it comes to the altcoin market. According to Messari, BTC had a real exchange trading volume of just under $500 million in the past 24 hours at the time of this writing. In those same 24 hours, "popular" altcoins Bitcoin Cash (BCH) and Dash (DASH) each had just $26 million and $11 million worth of real trading volume respectively.
The disparities are even larger when it comes to adjusted on-chain transaction volume where, according to Messari, BTC has had $1.3 billion worth of activity and Litecoin (LTC) has had under $20 million worth of activity.
Ethereum (ETH) is the main outlier when it comes to a cryptocurrency network's level of financial activity relative to BTC, with around $410 million worth of trading activity over the past 24 hours. That said, ETH's 24-hour on-chain adjusted transaction volume is less than one-fifth that of BTC's. Additionally, the increased ETH trading volume found on exchanges like Binance appears to be a relatively short-term phenomenon, according to data from TradingView. This increasing trading activity around ETH is likely due to the altcoin enjoying one of its best days on record against BTC.
For those looking for Ripple (XRP) and Stellar (XLM), those coins were not included because it's questionable as to whether they qualify as true cryptocurrencies. That said, it's worth pointing out XRP is the only major coin that is down against the US dollar this year.
Other coins that have become more popular over the past couple of years, such as EOS and Tron, simply do not have long enough histories to be considered. Altcoin markets tend to be too volatile and shallow to gain any meaning out of them in the early days. Even many of the more popular altcoins that have been around for five or six years are still barely traded by anyone on exchanges. That said, both EOS and Tron have followed the general altcoin trend of dropping heavily against BTC since the beginning of 2018, according to data from Coin Metrics.
Key Data Points
In terms of the altcoins we did look at for this article, there are a few key points that stick out.
One of the most notable bits of data found in our research is that LTC, which is the oldest altcoin still traded relatively heavily in comparison with other altcoins, is down 66.73% against BTC over the past six years. Six years is essentially an eternity in the world of Bitcoin and blockchain technology, so the fact that LTC is down against BTC over such a long timeframe should be viewed as problematic for the "silver to Bitcoin's gold."
Zcash (ZEC) also faces the troubling, and perhaps worse, reality of being down against BTC every year since it was first launched in October of 2016.
Another data point that sticks out is that ETH and ZEC are the only two altcoins covered that are down more in 2019 than they were in 2018. 2018 was the worst year on record for half of the altcoins covered in our research.
Of course, there have been exceptions to the altcoin bear market in 2019. Most notably, Binance Coin (BNB) and Chainlink (LINK) are both up substantially against BTC this year. LINK was up more than 800% against the US dollar at one point. Of course, we've seen many other crypto tokens come and go over the years, so it's unclear if these upwards movements in the BTC-denominated prices of BNB and LINK will be able to stand the test of time.
Where Do the Altcoins Go from Here?
The big, obvious question now is what will happen with the altcoin market going forward?
According to CoinMarketCap, the Bitcoin Dominance Index (BDI), which measures BTC's share of the overall crypto asset market, bottomed out at around 33% in January 2018. The BDI has since grown to 67.2% at the time of this writing.
It should be noted that the BDI is a problematic measurement for comparing BTC's true level of dominance over the total crypto asset market because it is based on the highly-questionable market cap metric.
One key realization that needs to be made when it comes to altcoins is that they really have nowhere to go but up when they are first launched. The extremely low levels of liquidity seen with these coins, especially when they are first launched, means it doesn't take much money to move the price around in one direction or the other. In this way, it's possible that what we've seen in the altcoin market over the years was nothing more than a giant bubble in the concept of alternative cryptocurrencies that popped in early 2018.
Some will say this same argument could also be applied to BTC, but the key difference is BTC has never been down against the US dollar over a six year time period (like LTC vs BTC) or gone down in value every year of its existence (like ZEC vs BTC). There were the roughly three years and three months it took for BTC to get back into the black after hitting the $1,200 mark in late 2013, but it should be noted that the $1,200 price from late 2013 was part of a short-term price bubble. The BTC price was only over $1,000 around this time for a matter of days.
It's possible that the market has simply realized there isn't much of a need for multiple cryptocurrencies over the past couple of years.