In recent months, altcoins have seen unprecedented growth. Bitcoin’s dominance in the marketplace fell from 62% to 37% in the past month.This trend could be seen as a healthy one. There are many amazing new digital currencies in the sphere that deserve a lot of attention, such as projects like Cardano and Icon.There are also signs, however, that the altcoin market is out of control. The most obvious sign being Dentacoin, which has seen a growth of 2,000% in the last 7 days. This is just one of many altcoins that have many veteran investors scratching their heads in disbelief.
Media attention on Bitcoin hit an all-time high. It’s hard to go anywhere lately without hearing someone talking about Bitcoin. With this attention comes new investors and new capital.Bitcoin is often the entry point for new investors. As they research more about their new investment, it becomes apparent to them that there are many other options in the marketplace. They wonder “which one will be the next Bitcoin?”[embed]https://twitter.com/scott_lew_is/status/950115827017232384[/embed]It’s easy to understand this line of thought. We all hear stories of people who invested $1,000 in Bitcoin in 2011, who are now millionaires. Rather than invest in Bitcoin which is at an all-time high, investors hope to find the next big thing, which is still low.This can lead to confusion because some do not understand the concept of circulating supply and total supply. Where circulating supply is the amount of a coin on the market, total supply is the total amount of coins that will eventually be released.There seems to be a trend where new coins are picking exorbitantly high total supplies like Dentacoins 1,841,395,638,392, which is 20,000 times more than Bitcoin.Many experts agree these high total supplies do nothing except give people the illusion they are getting a better deal. This is possibly one factor towards the recent surge in seemingly worthless coins which have a low cost per coin.
As in any market, there is a psychological factor of wanting more. The price you would pay for 0.05 Bitcoin can get you roughly 3 whole Litecoins. For many new investors, the idea of owning more can steer them to buy something less expensive.There is some basis for this type of logic, since owning more could mean more upside if the coin has good fundamentals.What doesn’t make sense is when people apply this logic to coins like Dentacoin.Some investors are now throwing money at cheap altcoins, hoping they may have a price surge. This behaviour is more like gambling than investing, adding volatility to an already volatile marketplace.Worse yet, many are often buying in after the price rises. They are buying in at all-time high prices and then watching their investment disappear as the price comes back to earth.
There is an unprecedented hype in the marketplace and it’s important to try to stay level-headed. Traditional marketplaces are often swung heavily by emotion and this fact is only magnified by the 24/7 nature and easy access to digital currency marketplaces.So-called market experts can send out a tweet that a coin is going to be the next big thing and the price will swell 10x in a few minutes. While these types of trades can be alluring, more than likely chasing them will only cause investors to lose money. Similarly, large investors, called whales, have become rich by using their power to sway the market. An example of this would be someone who holds a large amount of a digital currency, selling it off quickly. The sale causes a chain reaction of fear, uncertainty, and doubt (FUD), people sell en-masse and the price drops considerably. Then the same whale buys back even more of the coin at a new reduced price.
If you’re considering investments in digital currency, do your research. Try not to get caught up in the hype. South Korea, for instance, has become so hyped about digital currencies that many exchanges are reporting prices 50% higher than other markets. While it’s great to listen to what more experienced investors are planning to do, be aware that some investors will take advantage of the market hype for their own gain.
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