There are more than 10,000 cryptocurrencies in existence today.
While Bitcoin is the oldest and most well-known cryptocurrency, an ecosystem of developers, traders, investors, miners, and entrepreneurs have entered the crypto space. They’ve created thousands of new cryptocurrencies. Some compete with Bitcoin while others do something completely different.
As an analogy, think of apps like WhatsApp, Facebook Messenger, Twitter, Snapscan, Instagram, and Uber.
While they’re all apps, some are in competition, while others serve a completely different function. This spectrum exists in crypto too.
Some cryptocurrencies aim to offer cash-like anonymity, while others aim to tackle a specific industry like supply chain management, cloud computing, file sharing, advertising, the list goes on.
Bitcoin has opened a Pandora’s box with all the new crypto assets that have emerged. Now that the box is open, there’s no going back and as cliche as it sounds – the future has arrived.
Over time these cryptocurrencies have been challenging Bitcoin’s market capitalisation.
Bitcoin’s dominance, which is how valuable Bitcoin is relative to the rest of the cryptocurrency market, has dropped to 61% from 90% just 6-years ago.
Meanwhile, the cryptocurrency market has grown over 47 times over the same time period, to today’s $330Bn value.
What does it mean for us as investors?
It means there may be multiple success stories in the crypto space. On the other hand, it also means there’s a possibility that a cryptocurrency that looks good today is really the equivalent of MySpace – soon to be overtaken by Facebook.
Picking long-term winners is challenging
If all these cryptocurrencies have different use cases and performance, why not just invest in the best few names?