The cryptocurrency trade has grown at a staggering tempo. There at the moment are virtually 21,000 totally different cash in existence, throughout quite a lot of subsectors. From metaverses to decentralized finance, traders are spoiled for selection.
However a burning query, particularly amongst crypto skeptics, is that this: Are there too many cryptocurrencies? We have repeatedly seen how new altcoins could be created within the blink of a watch. Tokens popped up hours after Will Smith slapped Chris Rock on the Oscars — pumping and dumping on low liquidity. And following the dying of Queen Elizabeth, the markets have been flooded by a flurry of “memecoins” bearing her identify. Some critics felt this was in poor style and argued it was “a nasty search for crypto.”
Regardless of the proliferation of hundreds of cryptocurrencies — some with names impressed by main cash — Bitcoin and Ethereum proceed to dominate. Mixed, the valuations of those two digital belongings command a 58.2% share of the complete market. All of this leaves altcoins battling for a a lot smaller piece of the pie.
Is selection a great factor?
Let’s start by discussing the arguments in favor of this overwhelming assortment of cryptocurrencies.
Whereas Bitcoin and Ether are universally acknowledged and accepted, it is honest to say that many blockchains and crypto initiatives would favor to have their very own tokens. In some instances, it is a necessity too — soccer fan tokens would not make sense except the likes of Manchester Metropolis and Paris Saint-Germain have been capable of provide their very own digital belongings.
Stablecoins are one other group of cryptocurrencies the place quite a lot of choices is essential. Whereas belongings pegged to the U.S. greenback dominate the panorama, some traders favor to make use of stablecoins denominated of their native fiat foreign money, akin to euro or pound. And given how some stablecoin issuers have confronted uncomfortable questions on whether or not the cash in circulation are correctly backed by arduous foreign money in reserve, the variability on provide empowers traders with the flexibility to carry out due diligence and discover an asset that matches their urge for food for danger.
The cryptocurrency market is considerably much like a superstore. Inside the most important retailers, you possibly can come throughout 10 sorts of the identical cereal — and numerous styles of ketchup. However every has a special value level and a price proposition. Specialists inside these shops can have additionally carried out style assessments and security checks earlier than permitting the merchandise on cabinets.
You may argue that it is a comparable story with regards to crypto exchanges. Buying and selling platforms akin to HitBTC have a rigorous itemizing course of to make sure that all well-established cryptocurrencies are supplied to its clients — in addition to new tokens that present potential. Given how many digital belongings at the moment are in existence, this may typically really feel like discovering a needle in a haystack.
In fact, there’s two sides to each coin. With hundreds of various altcoins on provide, the will to repeatedly create new cryptocurrencies arguably results in additional fragmentation within the trade. A venture’s insistence that solely its native token will likely be accepted can add prices for customers too, as a result of they’re going to have to make conversions from better-known cryptos — and pay buying and selling charges alongside the best way.
It is inconceivable to think about a world the place Gmail customers may solely ship emails to others who’ve a Gmail account, with Yahoo and Outlook additionally working as walled gardens. However this appears to have turn into the established order within the crypto trade — and though efforts are being made to spice up cross-chain communication and forge bridges between blockchains, there’s nonetheless lots of work to be achieved. These bridges can even undergo unlucky safety vulnerabilities, as we noticed with the Ronin hack again in March.
And on the difficulty of whether or not there are too many cryptocurrencies, some critics argue this proves how ineffectual the market is. What is the level of getting Bitcoin, which has a hard and fast circulating provide of 21 million, when there’s a vast provide of different cash?
What the long run appears to be like like
Figures from 99 Bitcoins suggest that there are greater than 1,700 lifeless cash — a veritable graveyard of failed digital belongings that undergo from inactive growth, low buying and selling quantity, poor on-line presence, an absence of listings on main exchanges, or all 4. Given we’re at the moment in a bear market, it is virtually sure this determine will rise within the months forward.
It is value remembering that the crypto bull run of 2021 can draw parallels with the dotcom increase 20 years earlier. Again within the early 2000s, frenzied exercise noticed an explosion within the variety of web firms buying and selling on the inventory market, and many of them boasted sky-high valuations. Lots of them ended up going bust, together with Pets.com and Boo.com.
In a current report, KPMG warned that cryptocurrencies missing “clear and powerful worth propositions” may additionally find yourself dying out within the subsequent few months, however added: “That might really be fairly wholesome from an ecosystem perspective as a result of it’s going to clear away a number of the mess that was created within the euphoria of a bull market. The very best firms would be the ones that survive.”
And that is the opposite lesson that may be drawn from the bull run — regardless of how brutal or extended a bear market is, some cryptocurrencies will survive and thrive. This additionally stays a massively experimental expertise, and there are certain to be failures alongside the best way.
HitBTC argues that the crypto markets are nonetheless removed from maturity. It describes itself as one of many pioneers of the trade market, given the way it launched in 2013. The corporate says safety, ease of use and reliability are high priorities — alongside aggressive charges and a steady infrastructure. It now lists greater than 1,000 cryptocurrencies, and likewise gives staking and futures.
The crypto trade is progressive, and thrilling use instances are frequently rising for digital belongings. Due to this, the variety of new cryptocurrencies in existence is unlikely to sluggish anytime quickly. This implies it is all the way down to traders to carry out detailed due diligence on which cash to put money into — and exchanges should play an instrumental position in making certain that they solely listing credible cash that add worth to the ecosystem.
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