This article covers the third of three truths about bitcoin and altcoins. Catch the first and second truths, and come back soon for one lie.
A lot of people think money flows through the crypto market in a cycle from bitcoin > large cap altcoins > mid cap altcoins > low cap altcoins and then back to bitcoin.
For an illustration, see this well-circulated graphic from Rekt Capital:
There is no evidence of this.
While that may fit your personal journey, that journey has nothing to do with the market as a whole. Especially now, when so many people can buy altcoins directly with fiat—no bitcoin needed.
No cycle, just a rising ride
When you compare one altcoin to another, you might find this pattern. The big one pumps, then the small one. In fact, you can combine many altcoin pairs and find this pattern for specific pairs.
As far as a cycle—some sort of predestined path that money flows at scale across the market—you can’t find it.
I compared price charts for dozens of cryptos, way more than any sane person would ever want to look at. If this cycle theory were true, I should have found a pattern: large caps pop, then middle, then small, then micro.
I could find no combination of altcoins that showed anything resembling that pattern.
In fact, I found only one pattern, consistently and regardless of what combination of altcoins I selected. That pattern looked roughly the same across all altcoins, with modest variations.
For example, look at this chart comparing seven altcoins of different sizes over the past two years. During that time, we saw three altseasons (two if you exclude the mid-2019 pump).
All prices follow the same general path, more or less, as shown at the top of this chart.
Some move a little earlier, some a little later, some a little higher, some a little lower, but in the same direction at roughly the same time, without regard to the size of the altcoin.
Perhaps the cycle held true a long time ago. Today, a rising tide floats all ships.
When the market goes up, altcoins do, too. Size doesn’t matter.
Performance, on the other hand . . .
You can find differences in their performances over time, but not the path they take.
Unfortunately, I couldn’t figure out how to cram discovery that into a legible graphic, just visual gobbledygook or a series of images. Poor form for an internet post.
If you take some time to browse through a bunch of altcoin price charts, here’s what you’ll find:
- Winners tend to pump harder and dump less than others, consistently and over a long period of time. In other words, when the market rises, they rise more than their peers. When the market falls, they fall less than their peers.
- Some altcoins languish for a long time, then start running and never look back.
- Other altcoins dominate for long stretches of time and then fade away.
That’s the natural evolution of the market and the competition for investment, not an altcoin cycle.
In any event, almost all altcoins go up during altseason, even the dead ones. Have fun while it lasts!
Mark Helfman publishes the Crypto is Easy newsletter. He is also the author of three books and a top bitcoin writer on Medium and Hacker Noon. Learn more about him in his bio.
Originally published in Cryptowriter.
Also published on Medium.