Is Bitcoin losing its position as the leader in the crypto market?

Bitcoin has struggled to hit its all-time high in the past few months.

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Bitcoin prices have done well lately, having followed a steady upward trend over the past few weeks that climbed to a record high earlier this year.

The world’s largest cryptocurrency by market capitalization hit $ 51,037.01 today, its highest level since May 14, CoinDesk figures show. At that point, it had risen more than 75% since hitting a local low on June 22nd.

While this may sound impressive, other prominent digital currencies have recently dwarfed Bitcoin with their superior performance.

Ether, the second largest digital asset by market value, has more than doubled in recent months, and Cardano’s Ada token has tripled in the same amount of time, according to CoinDesk price data.

Ether hit $ 4,026.93 today, after hitting its most recent high on the 22nd, Ether is up more than 400% year-to-date.

Cardano’s Ada token benefited from even more convincing price gains, rising to an all-time high of $ 3.10 yesterday. At that point it was up more than 200% after hitting a local low of $ 1.00 on June 22nd.

[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]

In the midst of these latest developments, some market watchers might wonder if Bitcoin is still the market leader it has been for years.

“For most of its history, Bitcoin has acted as the reserve currency of the crypto ecosystem and led the way up or down for everything else,” said Jesse Proudman, co-founder and CTO of crypto hedge fund Strix Leviathan.

“In the past few months we have seen a significant change in this status and in the last week we are seeing the beginning of a clean break where Bitcoin is now following the movements of other currencies like Ethereum,” he said.

Jeff Dorman, chief investment officer for asset manager Arca, put things a little more bluntly.

“Bitcoin is no longer leading the markets,” he said. “It has seen both bad moves up and down throughout the year, which means it can’t keep up with rallies AND sell more than other assets during downturns.”

“More importantly, everyone (except those individuals and companies who rely solely on the success of Bitcoin) are beginning to understand that Bitcoin should not be tied to the success or failure of any other asset. They are completely different. ”

“Unlike the early days of digital assets, when bitcoin was the only game in town, this asset class has now moved well beyond cryptocurrencies,” he noted.

“There are new sectors with much faster growth paths like DeFi (decentralized finance), gaming, sports, NFTs and Web 3.0, all of which have completely different factors and token attributes that contribute to their returns.”

The “maturation” of Bitcoin

Blockstream VP of Financial Products, Jesse Knutson, was more optimistic, pointing out how the world’s most famous digital currency continues to develop.

“I think what we are seeing here is the maturation of bitcoin,” he said.

“There has been an incredible amount of institutional and even sovereign interest in this space over the past 12 months,” said Knutson. “This interest focused almost exclusively on Bitcoin.”

“The world’s largest asset managers, such as Capital, Fidelity, Blackrock and Tudor, are trying to get exposure to Bitcoin but are still largely limited to listed proxies and derivative products,” he noted.

“Morgan Stanley and JPM are introducing dedicated Bitcoin products for private wealth customers, and countries like El Salvador see Bitcoin not only as a growth driver, but also as a solution to the challenges of financial infrastructure.”

“Given the massive changes in market participants this year, I think it makes sense to see some price divergence between Bitcoin and speculative digital assets from time to time,” said Knutson.

“The macro background is very supportive of the Bitcoin investment thesis and there is a wave of monetary construction that I think will likely find it difficult to fit into this still relatively small asset class by institutional and government standards.”

Continuous market development

Other analysts offered different perspectives on how they think the broader digital asset markets will mature over time.

“The crypto asset class is viewed by many as a bitcoin-powered monolith,” claimed Amber Ghaddar, co-founder of the decentralized capital marketplace AllianceBlock.

“Our thesis has always been that, even if Bitcoin is the flagship of crypto, bifurcation and a decrease in correlation can be expected in the long term.”

Over time, she expects individual digital assets to derive their value less from speculation and more from their own specific properties.

“Prices have two components: a fundamental component and a speculative component. The speculative part is usually the largest and is determined by sentiment, expected future usage, and scalability, ”noted Ghaddar.

“We expect that the fundamental component – which is easy to calculate by looking at the network data – will take up a larger share of the price as new Layer 1 blockchains begin to mature and / or go live.”

Jalak Jobanputra, founder and managing partner of Future Perfect Ventures, also spoke about the growing divergence between Bitcoin and other digital assets.

“We firmly believed in a multi-crypto world and that each currency would at some point be valued according to its particular use case,” she said.

“Bitcoin has developed as a store of value and protection against inflation, while Ethereum has become the currency for DeFi and NFT applications and thus in many ways the reserve currency for Web 3.0. I assume that Bitcoin will follow more macroeconomic trends, as is currently the case. ”

“This is an exciting transition as we see some of these blue-chip cryptos not just being used as tools for speculators.”

Disclosure: I own some Bitcoin, Bitcoin Cash, Litecoin, Ether and EOS.

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