Over the past few weeks, as Bitcoin has finally reversed the downtrend that brought prices 50% lower in the second half of 2019, alternative cryptocurrencies have started to surge higher.
These cryptocurrencies that aren’t Bitcoin, coined “altcoins” by traders, have strongly outpaced BTC, so much so that the Bitcoin dominance metric has fallen by multiple percentage points.
Just look to the chart below, which shows that the past month has seen assets like Ethereum, Litecoin, and XRP outpace BTC.
Many analysts on Twitter have claimed that this outperformance is a precursor to a so-called “altseason,” a term given to a period of time in the cryptocurrency markets where altcoins gain hundreds of percent against Bitcoin.
Though, according to a prominent crypto commentator, altcoins are unlikely to exceed BTC for all of 2020, claiming that the foremost digital asset remains the best risk-reward play in this nascent industry.
Bitcoin Remains the Best Crypto Investment, Not Altcoins
Early this month, Mike Novogratz — CEO of Galaxy Digital and a former partner at Goldman Sachs — found himself under fire in some parts of the crypto community after a report revealed he was largely skeptical of XRP’s prospects in 2020. More specifically, he said he expects for XRP to largely underperform BTC this year.
Although this comment largely came out of left field, so to speak, he doubled down on this sentiment in a recent Twitter thread, explaining why he thinks XRP (and altcoins as a whole) are unlikely to be 2020’s best crypto-centric investment opportunities.
2. This year the broader alt market, including $XRP has outperformed $BTC. This has surprised me. That said, I see more and more large accounts getting educated and set up to be accumulators of $BTC snd believe on a risk adjusted basis it’s the best place to bet on crypto.
— Mike Novogratz (@novogratz) February 6, 2020
Novogratz admitted that while he has been “surprised” by altcoins outpacing Bitcoin to start 2020, he sees BTC stealing back the spotlight as the year goes on.
He attributed his position — which has been reflected in his personal investment decision to be “almost solely long BTC for the past 15 months” — to his view that as more institutional accounts get educated, Bitcoin will gain more of the spotlight:
“That said, I see more and more large accounts getting educated and set up to be accumulators of BTC, and believe on a risk-adjusted basis it’s the best place to bet on crypto.”
Indeed, the institutional crypto services that have recently been launched — like Bakkt’s financial vehicles and Fidelity’s crypto custody and trade execution branch — are focusing primarily on Bitcoin right now. This simple limiting factor suggests that when more institutions foray into crypto, they will focus a majority of their efforts on BTC.
Novogratz added that Bitcoin is the only cryptocurrency with a bonafide use case of being a digital store of value, adding that the rest of the crypto assets are “venture bets” at best “and will only have lasting value if they become a product that is useful.”
He continued that XRP, Ethereum, etc. remain in a so-called “proving phase,” whereas they need to, well, prove that they have a proper place in the world of fintech.
Are There Exceptions to the Rule?
While the Wall Street legend seemingly indicated that there are no altcoins that are exceptions to the rule, Ethereum, some say, is quickly carving out its own use case and niche in decentralized finance (DeFi).
Indeed, just today, data from DeFi Pulse revealed that the amount of value locked up in Ethereum-based finance contracts hit $1 billion, which is a sum up hundreds of percent in the past few years.
While $1 billion is far from a large sum in the grand scheme of things, due to DeFi’s strong growth, many, including a Coinbase product manager, have said that finance is Ethereum’s foremost use case.