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Falling Returns: Is Bitcoin Bad Compared to Altcoins?

7 min reading

The first half of 2021 saw many comparisons in the crypto market with 2017. Bitcoin (BTC) was ripped to record highs, new frontiers of decentralized financing emerged, and unmixed tokens received countless approvals from celebrities.


The first half of 2021 saw many comparisons in the crypto market with 2017. Bitcoin (BTC) was ripped to record highs, new frontiers of decentralized financing emerged, and unmixed tokens received countless approvals from celebrities. But after the first few months of euphoria and subsequent selling, BTC's performance was significantly weaker. The recent market selling after the Evergrande crisis has heightened fears. However, it cannot be ignored that many altcoins, especially platform tokens, have seen impressive streaks and, in some cases, even tackled broader market trends. With hopes still high that another bull may occur in this half cycle, should BTC owners worry that their flagship asset is not performing well?

Between January and hitting a record high (ATH) of nearly $65,000 in April, BTC was up 113%. Based on current prices, the YTD profit is around 45%. In comparison, Ether (ETH) was up 497% between January and its ATH in May, while the year-to-date is up more than 300%, although recently faltering. But even ETH's impressive gains are nothing compared to the platform's competitor tokens. Cardano (ADA) has seen a staggering increase of over 1,000% since the start of the year, barely holding back any real activity. Solanas SOL even reduced that number and increased more than 8,000% since January. It came after falling from a record high of more than $200. Honorary prizes went to Polygon (MATIC), Avalanche (AVAX) and Terra (LUNA), all of whom had impressive rallies in 2021.

"Overall, there's a lot of enthusiasm for Web 3.0, whether it's pushing a meta-universe with ETH or much faster times for SOL transactions or whatever the future holds for ADA. People see that keeping logs is the first layer. a good choice for the future. It makes sense to invest in solid technology and to track the dynamics and progress of the asset class as it is actually used." At first glance, the numbers show that BTC rates poorly compared to other coins. One factor that can explain this is the law of diminishing returns. BTC is the oldest asset and twice as old as ether. Even though Bitcoin has generated impressive returns over its lifetime – which made the billionaire an early adopter – is it possible that the mainstream asset can continue to generate triple or four-figure returns as it ages? Given that Bitcoin's entire economic model is based on the principle of diminishing returns, with block prices halving every four years, this seems plausible.

Moreover, as previously reported, with the accumulation of more investors and institutions, Bitcoin began to mirror other assets. We can see this effect in reducing Bitcoin's volatility over time. Perhaps the only reason the market continues to grow is because investors are constantly looking for new investments. Therefore, while BTC appears to have lower yields, it is not surprising that investors are attracted to more volatile assets to profit from price movements. However, this raises another question: Is there a risk that BTC will create a self-running negative cycle? Will BTC inevitably lose its appeal as investors look to other assets to make big profits?

Or, if we dare to imagine, does the platform's current appetite for tokens suggest that Bitcoin investor sentiment is leaning toward the "intrinsic value" argument? After all, the stronger foundation and acceptance potential are probably the only big selling point that the platform token has over Bitcoin. Miha Benoliel, co-founder and CEO of the decentralized Internet of Things node network, believes that platform tokens have a bright future, but perhaps not at the expense of BTC. “I think the market is just starting to understand the value of blockchain ecosystems and services. This is why altcoins are doing so well. Bitcoin, which is more of an investment, is on its way and becoming a less risky crypto asset class for people with long-term investment strategies. " Said Benoliel.

From a different angle, even if bitcoin returns fall from their historical highs, profits continue to outperform other assets such as stocks and gold. At the current rate of decline, BTC will continue to perform very well for a long time. Therefore, it seems unlikely that a way out is unavoidable. Daniele Bernardi, CEO of investment firm Diaman Group, “Of course, Bitcoin seems to be underperforming in terms of percentages compared to small and medium-sized coins. But don't forget the big difference in capitalization. A 10% increase in the price of BTC increased the market cap by $80 billion. For example, if Solana increases 100%, the actual market capitalization value increases by $40 billion. Having said that, I don't think there is any reason to doubt Bitcoin or its position as a market-leading asset.” Said Bernardi.

As for the bull's trajectory, it's also worth noting that Bitcoin was up 1900% between January and December in 2017. In 2021, however, it's only been around 450% so far. If the price followed the same pattern, it would block BTC's year-end price of around $138,000. That estimate is very close to the year-end price of $135,000 provided by the Stock Availability Model (S2F), which remains the most accurate Bitcoin price prediction. In fact, the August closing price of BTC is a give or take, as S2F maker PlanB predicted in June, and September will soon follow. The figures illustrate that BTC returns on successive upward cycles decline over time. But that should come as no surprise, given Bitcoin's economic model. Michael van de Pope, a full-time trader, agrees. “Investors need not worry. Indeed, it is the natural habit of the market to slow down and prolong the cycle. We will see this more often in the future and it will actually open the door for more investors. The less bitcoin fluctuates with its daily performance and movement, the better it is as an asset in your portfolio. "

The gradual decline in returns should not deviate from the fact that Bitcoin delivers a healthy performance in all respects, in line with even the most optimistic projections. According to Igneus Terrenus, Head of Communications at Bybit, BTC is still the best coin for institutions newcomers or people entering space. “Bitcoin remains the best-in-class crypto asset for institutional investors. And a relatively more stable selling model could actually help in the case of Bitcoin as an alternative to gold and propel its long-term upside. If you cut yourself down to five or ten years - a horizon familiar to whales and institutional investors - bitcoin returns beat it all. " Said Terrenus.

It is also impossible to say whether one of the last symbolic demonstrations will take place on the platform if BTC goes into long-term bear territory as money usually flows from BTC. Moreover, the model shows that there is still plenty of reason to believe in a BTC price of more than six digits by the end of the year. Gregory from agrees despite the increasing demand for tokens on the platform. He said, “BTC is outperforming the market but is currently being held back by Wall Street macroeconomic trends and developments. Historically, the fourth quarter was the strongest for BTC and will likely repeat history before the end of 2021. While BTC is in no danger of losing its status as a leading crypto asset, the growth of altcoins undoubtedly now offers greater opportunities for those who believe they can time the market. 

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