With a $216 billion market value on Dec. 31, bitcoin was often the first stop -- and maybe the last -- for investors who then maybe dabbled in smaller, more volatile tokens. A surge in investor interest typically benefits the smallest more, simply because they have smaller market values, said Spencer Bogart, a partner at Blockchain Capital LLC in San Francisco.
“This goes both directions though: often when crypto markets are falling you see a rotation out of the long-tail of crypto assets and into bitcoin, the ‘king of crypto,’ which is rightfully perceived to have the most staying power in the ecosystem,” Bogart said.
Crypto Party
As the crypto party grew bigger, the crashers -- blue-suited investors and hedge funds -- have purchased mostly bitcoin, and they have different buying criteria than early converts who may have moved on to less-liquid units like dash or monero, according to industry observers. The diluted investor base may weaken the yoke to bitcoin, the biggest by market value, they say.
“The capital base of these markets is evolving rapidly,” said Kyle Samani, managing partner of Multicoin Capital, a digital-asset hedge fund in Texas. “Before the recent bitcoin bull run, the investor base in crypto was mostly engineers, nerds, and libertarians. ”
In the U.S., Samani of Multicoin Capital says he sees a division between what’s on offer at the popular Coinbase exchange, and everything else.
“Most retail investors are only buying assets available on Coinbase,” he said. “We should continue to see a decoupling between what’s on Coinbase versus other altcoins.”
This article was provided by Bloomberg News.