Bitcoin Is Sucking All the Oxygen

With all this love for bitcoin, spare a thought for the little guy.
Despite a plethora of new coins coming online in the past year, and the emergence of ethereum as an alternative cryptocurrency, bitcoin is still sucking up most of the oxygen.
Without a doubt, the new coins’ sponsors owe a debt of gratitude to bitcoin for blazing a trail. But you’d think some of them might enjoy more of the spotlight.

Take ethereum. Despite a widespread belief that it’s more versatile than bitcoin because of a technical ability to support other uses such as smart contracts, its coin (called ether) has been slower to take off. Sure, growth has been phenomenal, including a 55-fold increase over the past 12 months, but not quite at the long-term rate enjoyed by bitcoin.

By tracking the number of days it took for both currencies to double — from $1 to $2, $2 to $4, and so on — I found that ethereum has been a consistent laggard. It’s been at least 190 days since that cryptocurrency reached $256, yet it still hasn’t sustained itself above the next benchmark of $512. Bitcoin’s growth would suggest it should have hit that point around six months ago.

Stunted Growth
Ethereum has been slow to take off despite bitcoin blazing the trail 2017-12-03 15-29-42-758
Source: Bloomberg,
Note: Chart for selected price benchmarks has been trimmed to fit to scale. Data for five-day moving average price in order to eliminate short-term spikes.

There are many reasons why this may be the case, including a rash of new coins, many based on ethereum, that diverted funds elsewhere. Detractors also point to a previous incident that led to the cryptocurrency being forked.
Yet people who looked beyond bitcoin would have been rewarded by returns many multiples of that offered by the leader over the past year.

All Boats
Bitcoin’s 12x increase in value pales in comparison to growth for the rest of the market 2017-12-03 15-30-04-611
Source:, calculations by Bloomberg Gadfly
Note: Data based on market cap every four weeks except beginning and ending dates.

And while many punters have tried to ride the wave of smaller coins, sticking to the top 10 would have been a solid strategy, returning around 64 times the initial investment from a year ago. Admittedly there’s a certain amount of selection bias here, but most of the top 10 coins today were also leading players in December 2016. The point is that selecting a broad basket of smaller coins wouldn’t have been a better guarantee of bigger returns than simply choosing a selection of top 10 names — as long as bitcoin wasn’t among them.

Bottom Up
Smaller cryptocurrencies have seen a far larger gain over the past year, driven by a plethora of new coin releases and increased interest in the sector 2017-12-03 15-30-53-423
Source:, calculations by Bloomberg Gadfly
Note: Data based on market cap every four weeks except beginning and end dates.

Despite this, bitcoin’s early-mover advantage, continued fame, and single-purpose use (as a store of value) still make it an oversized influence on the global crypto market, in a way that suggests it’s already playing the role of reserve currency among peers. This may also be because most exchanges offer some kind of bitcoin pairing, and many only allow trades into and out of fiat currencies via bitcoin. The same can’t be said for other coins.

The Little Guy
Bitcoin still dominates the rise in crypto market value, but other top 10 coins started to throw their weight around in the second half of the year 2017-12-03 15-31-58-632
Source:; calculations by Bloomberg Gadfly

It’s still the Wild West in Coinlandia, and there’s no sense that bitcoin is going to go away anytime soon. But we’re yet to see what role all those alternative currencies will play in a broader market.
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