Topic: On value dilution (Read 562 times)

quite complicated but if recalled in the past the value of bitcoin is very low and the peak value of bitcoin in 2017, it may be right, altcoin takes the value of bitcoin and maybe NO, because of the decline in the value of bitcoin it causes many to sell in large quantities, and if you know the contents of the big whale's wallet might be surprised, so basically I think altcon has no connection with the value of bitcoin.

As I said, I didn't intend this topic to turn into a debate of whether altcoins are good or bad

But personally, I think they are a good thing overall (well, at least some of them, for example, Litecoin) but then again, this is not what this topic is about. Regardless, if altcoins give more than they take from Bitcoin (ultimately, Bitcoin's value expressed in its market price), then it would mean that they add to its value (and price) as a net result. But this is exactly what is for debate here

Regarding Coca-Cola, yes, I think we can safely assume that. The inference should be straightforward. As long as people buy drinks specifically because they are carbonated and have caffeine in them, they will start drinking more Coca-Cola if there are no other such drinks around. I think this is a pretty solid assumption

But what if what they take doesn't exceed what they add? Are there stats on the number of people that switched from alts to BTC? I think there are many of such people. Do you think that if there were no other carbonated drinks with sugar and caffeine in them, it would be better for Coca-Cola? I don't think so because, in my opinion, those other drinks get people used to the idea that consuming such drinks is a normal thing, and then some of them start looking for the best one in the field. Also, a healthy competition wouldn't hurt any business.

In fact, that remains to be seen

But your premises themselves are pretty much wrong on their own. All cryptocurrencies are mostly used for the same purpose which is earning profits via speculation. In this manner they are all very good substitutes for each other. And it is not about that only. For example, you can use Bitcoin to hedge against altcoins volatility. In this case, you can't technically say that Bitcoin is a substitute for altcoins, but they are still used together (read, you are incorrect even if your premises had some ground)

I don't think presence of other cryptocurrencies can impact the price of Bitcoin significantly. Any commodity can significantly effect the price of other commodity only if they are substitute to each other. In the absence of substitution effect, what you saying isn't possible.
Now coming to captial market: the substitution effect is not present in capital market. For example: if Gold prices increases, it doesn't mean investors will right away sell their equities and invest in Gold because both markets are independent. Same applies to crypto market too. All coins are generally existing complementary to each other and the fact that altcoins exist doesn't decrease the demand for bitcoin rather increase it since direct market is not available for most of the coins and one has to buy btc in order to invest in other coins.

I'm not sure how I can be partially right here

Really, if Bitcoin price would be higher without altcoins, then I would be just right (read, 100% right) since this is what my point essentially boils down to. In this case it would be legit to say that altcoins are in fact diluting Bitcoin's value as that is the net effect of their existence. It doesn't matter that while taking from Bitcoin they are also adding to it something as what they take exceeds what they give back

Or, another option, they would pull out of crypto completely in the case of being disappointed with the gains they could make with trading BTC.

I think, you are partially right that Bitcoin price could be higher if there were no altcoins. But only partially because with all that buzz new projects generate, it can be true that we are getting more adopters of crypto in general, who then switch to BTC seeing that their projects fail. So, this sword cuts both ways, as they say. We can't state with certainty neither that altcoins are taking value from Bitcoin, nor that Bitcoin is benefiting from them.

I think there's not a lot of difference really

Indeed, if you calculate two different correlation coefficients, i.e. one for the downward movements and the other for the upward ones, they may in fact be somewhat different. But I don't really expect them to be too different to draw a conclusion like the one you arrived at (like "bitcoin does not have such a strong influence anymore")

In other words, if you just evaluated the upward correlation (without first considering or taking a look at the other metric), you would have to conclude that the price action between Bitcoin on the one side and altcoins on the other is still highly correlated. If anyone wants to make direct assessments, you are welcome

I think Bitcoin is the only currency that has structure, that is, you can identify the phases through which it has passed, being accumulation, trend and distribution, the Altcoins have no life of their own, they all depend directly or indirectly on Bitcoin, so much so that its graphs are very similar to bitcoin, especially the ones you talk about, however, the bitcoin when prices drop in some exchanges some coins go up, up to 30%, this is simple, they are the ones that survive thanks to Pump and Dump ... but altcoins bleed when bitcoin goes down, it's law.

I think that if there were no altcoins, less people would know about crypto and be interested in it at all. So I'd say that altcoins increase the value of Bitcoin. In the bearish market, bitcoin indeed seems to set the standard of the price dynamics for other coins (just look how similar the weekly charts of the main cryptocurrencies are).
But when the market is bullish, yeah, the top coins are mainly going up, but their price patterns are not similar to one another, because bitcoin does not have such a strong influence anymore. Take a look at these charts, for instance:

All cryptocurrencies have basically the same value proposition

If we cut all the empty verbiage, most of their value comes through speculation. More privacy, faster and cheaper transactions, etc are important only as long as they can be used for heating up the speculation and adding more fuel to the hype. For example, ZCash was created as a Bitcoin copycat with more privacy added, and how many people were actually using it with this purpose in mind? I don't think that many. After it got kicked from regulated exchanges (for being too private), its price crashed. So much for the longed for and dreamed of privacy, huh


I'd rather say it is more like some part of them is not playing in the same market as Bitcoin (probably, even the minor part) but they are still traded on exchanges. For example, I see EOS and Ethereum being listed at Bitinex (in fact, I'm shorting the latter right now), so it is not like they don't meddle with Bitcoin on this front as they definitely do

I think it depends on the BTC value proposition. If altcoins have the same value proposition, i.e., as a P2P cash system, then these altcoins would dilute the BTC value. In other words, altcoins such as LTC, BCH, XMR, etc., would take away some BTC market share. However, it depends on your judgment whether some properties like more privacy, faster tx, etc., are offering different (significant) value proposition or not.

For the Dapps platform like EOS, ETH, ADA, etc., they are not playing in the same market as BTC.

Technically, I agree with this (to a degree)

Altcoins pick up where Bitcoin leaves off. For example, many people after a while become no longer satisfied with the money they make through Bitcoin's volatility (as they say, one leg of mutton helps down another), while altcoins look promising in this regard (whether they actually live up to these promises is another question)

However, I don't see how it disproves my point as people move from Bitcoin to altcoins looking for more profits, and that's exactly what I'm talking about, i.e. without altcoins people would be trading Bitcoin only (note that I don't say whether it would be good or bad)

On the truest sense the answer is yes because if we are talking about Bitcoin's market share in the crypto market we are seeing that it is on a decline. But if you think that Bitcoin can go to it ATH as the one and only cryptocurrency market than think again. Without altcoins in the market I doubt that BTC will even be as popular in the market compared to what we are seeing now. Bitcoin and altcoins have a symbiotic relationship on the sense how Bitcoin's movement can influence the market and how altcoins made the market even more popular to its investors.

That's why we need another metric

Which would be more reliable and accurate. Personally, I go for trading volumes, though they are not without their own shortcomings either because much of the trading volume is outright fake. On the other hand, I don't think that all 5000+ altcoins combined would inaccurately "devalue" Bitcoin in market cap terms anyway, especially if most of them are left for good and dead, i.e. their orderbooks (whenever they might have been listed) are empty at the Bid side (which means they are totally worthless)

People mostly assume that there are like 2000 altcoins in existence based on what Coinmarketcap indicates, but that's not even half of what exits, and it might not even be a 10th in the grand scheme of things.

Binance once stated that they received listing applications of over 5000 projects, so imagine how many of these they had to reject and for that reason don't make it to Coinmarketcap.

That's also one of the reasons Bitcoin's market cap dominance isn't a helpful metric. In the coming years there will be so many coins and tokens added to Coinmarketcap that Bitcoin's market cap dominance will tank below 25%.

This point is debatable

It can be said that it is altcoins which get publicity through Bitcoin. After all, if Bitcoin didn't appear, altcoins would not be heard of either (well, there could be some other form of cryptomoney but it is irrelevant). In this way, it is altcoins which are profiting from the Bitcoin popularity and not so much the other way around. So even in this specific case altcoins take more than give back


People learn about crypto via Bitcoin, not altcoins, so the net result should be pretty clear

I guess there is a sweet spot in between. I mean bitcoin without altcoins wouldn't have gotten this much attention to begin with, so bitcoin definitely needs altcoins to exists, however it is also true that some money that could go to bitcoin is also diluted into altcoins which makes bitcoin not go higher with that money.

Now, if there was no altcoins that would mean bitcoin would get that money instead but at the same time if there was no altcoin bitcoin wouldn't get attention from some people who like altcoins more as well. That is why I think there is a fine line of "too many altcoins" and also "not enough altcoins", ethereum and litecoin and many coins like that are fine and should exists and helps people out but there are over 2000 coins which we do not use or need, they are useless to begin with and should be gone.

I believe if we had like 500 coins at max, that would be fine and help bitcoin, anything over is just pure waste of time and effort and money.

As much as I myself want it to be the case here, it is nowhere near that

The only void that altcoins can fill is lack of volatility in Bitcoin if it can be said so, comparatively speaking. Indeed, Bitcoin is volatile as fuck but altcoins take volatility to the next level of extremity. In simple terms, they are more speculative than Bitcoin, and this is their only real advantage

Okay, I know that there are features that Bitcoin lacks (for example, smart contracts). But how much of Bitcoin price (or lack thereof) can be attributed to them? I don't think that much. In this way, your whole assumption seems to be based on non-existent premises (well, let's call them far fetched) and is therefore invalid overall

I think Altcoins are filling the vacuum left by Bitcoin. More like what Andriod is to Apple. There wouldn't have been need for altcoins if their features are available on Bitcoin. It would be impossible for Bitcoin to solve every single problem plaguing t cryptocurrency. New Idea shouldl always be welcomed

I don't think bitcoin will be better without altcoin because as far as I know, the altcoin exists in the cryptocurrency to help the user to earn bitcoin by trading. Altcoin like ethereum makes people know about cryptocurrency because they read about many projects from 2017 ago and it makes them know that in the higher position, there is bitcoin that leads the cryptocurrency market.

I realize that besides of Ethereum and the other big coins or in a good position at CMC, many altcoins still competing with each other to raise a better place too. So altcoin doesn't have any chance to eat away at Bitcoin's value because altcoin value will not reach bitcoin value. But I don't know with the future because this technology still developed and maybe in the future, we will see another technology that can compete with blockchain technology or with the other.

So what's the bottom line?

Do altcoins add to Bitcoin value or take from it (price-wise, before all)? To make things easier to understand, would Bitcoin be priced higher if there were no altcoins (or just less altcoins)? Further, it seems to be universally accepted that Bitcoin is the primary driver behind the market growth (as well as downfall, for that matter). In other words, where Bitcoin goes, there altcoins go as well (on average)

I found an answer to this question for myself by looking at bitcoin dominance on the market and prices. There is no strict correlation between bitcoin and altcoins. However, if we analyse history with the help of coinmarketcap's historical snapshots, a few things become clear:
1. Bitcoin's dominance is falling as the market grows.
2. Meanwhile, the prices of bitcoin as well as other coins are growing.
3. During the bullish market, bitcoin and altcoins are doing great in terms of prices, and bitcoin's dominance is decreasing.
4. During the bearish market, bitcoin and altcoins are losing value, and bitcoin's dominance is increasing.
With that being said, when bitcoin goes up, other coins follow the trend. When the market is in very good condition, some coins go up, others might go down, but the prices generally don't follow those of other coins apart from the general upward trend. When bitcoin is going down, other coins generally tend to follow the trend and lose more. So, when things are bad, they are bad for bitcoin and even worse for altcoins. Thus, IMO strong altcoins help out bitcoin and vice versa, the market's growth is good for the king as well as for the kingdom, so to speak.

I'm curious where you see hundreds of millions of dollars in these pairs

Well, really, where did you get that, care to provide a reliable source? Top altcoins at Bitfinex barely make 10M dollars a day via Bitcoin. This is nothing compared to fiat trading volumes which are literally in the hundreds of millions. Anyway, we should compare trading volume in fiat pairs with trading volume in Bitcoin pairs, and then you will see the discrepancy. Further, I'm not sure if it has anything to do with the whole matter as such. Okay, there is some Bitcoin trading with altcoins going on and so what?


Indeed, I'm looking at the top altcoins only as the rest of the pack is even less than negligible

no i don't think so.
i have seen cases where some shitcoin on top got dumped super hard and it could successfully bring bitcoin price down with itself too but they are not big enough to put a permanent dent in bitcoin price and pull it out of its ongoing rising course over the long run.

Uh, each of those alt/BTC pairs are doing hundreds of millions of dollars worth of volume each day. That is negligible to you? All of the BTC trading on these markets is literally taken from the spot market supply. Negligible? LOL.....

Not to mention, you're only looking at the top coins. Of course those have bigger fiat markets. Outside the top 10 or 20 coins, fiat markets are much less significant than BTC markets.

Bitcoin can be "adopted" only as a store of value

And in this respect it has an unbeatable advantage before any other cryptocurrency. That they can't possibly take from it, ever. On the flip side, though, it is still more of how things should be (i.e. how we hope they will be), not as much as they really are, now, with the meaning being that Bitcoin is still speculative for the most part

But as other coins are also speculative (even more speculative than Bitcoin itself), this inexorably drives us to the conclusion that altcoins can't but eat at Bitcoin's sweet pie (like the one posted in the OP) simply because that pie consists of speculations mostly, not real adoption

of course this happens because the gateway to trading on altcoins is bitcoin. by first buying on btc, it will have a positive impact on bitcoin, but when they have traded to altcoin using btc, there is a negative impact on btc. but at least the more altcoins, of course, will be a positive point for btc

Saying that bitcoin is deflationary is oversimplifying.Bitcoin is a digital asset with a very elastic price.Even small changes in btc supply/demand can lead to big movements of the bitcoin price.
Nobody can prove that altcoins "eat" the value of btc,because there's no way to find out what the btc price would've been in a world without altcoins.

I think this effect is negligible

It is so because altcoin exchanges are inconsequential themselves as most traders are still mostly interested in fiat in the end. So even if they may in fact use Bitcoin as a value transfer vehicle (which I doubt since Litecoin is mostly used for this purpose), the end effect should be pretty much insignificant. Anyway, here's the chart from Bitfinex that I made just now and which basically proves that:



As you can see Bitcoin-altcoin trading pretty much sucks compared to fiat pairs there. The difference is 10-fold, which speaks for itself

ofcourse, although bitcoin or altcoin is worthwhile because without it, nobody even values ​​it even though it's another decentrilized crypto all earns the most important bitcoin, so for me it's worth really then it goes though of low cost still has this single cryptocurrency in the country. and then I still stay with bitcoin even more. so for me no matter what happens it still has value.

I think it depends. Bitcoin is a pure decentralised cryptocurrency, and it is obviously the most trusted and most adopted, while a lot of these other cryptocurrencies try to address different niches and needs that simply aren't what bitcoin is trying to target.

Is bitcoin's value diluted by this? I think to some extent in the short term, especially in bull markets where money may be flowing to other cryptos instead of solely to bitcoin.

But in the long run, what matters is still adoption. I think that people looking into other cryptocurrencies that offer different functionality won't necessarily have a negative impact on bitcoin's adoption levels. Plus, there is really no way to stop the creation of new cryptos. Bitcoin's supply will still be capped, and that won't be any different, which is a reason why I personally wouldn't get too excited about "fad" coins.

I will be personally happy if the entire crypto market consist of bitcoin alone and a few anon and stable coins rather than tons of other coins, i am sure the market will be much better than it is now if there are a few coins, the problem is that people who came in late have lost money investing in alt coins and token projects expecting a good return and it will take a long time for them to consider to invest once again in this market. There is a market dilution as millions have being invested in some of these projects and millions lost in scams, you can only wish if those were invested in bitcoin.

There might be some element of this happening, a "dilution" of sorts. But I think it's probably outweighed by the effect altcoin markets have on the circulating BTC supply.

The altcoin markets reduce available supply in the BTC/USD (and other fiat) markets for multiple reasons. People buy BTC to send to altcoin exchanges. In addition, speculative BTC that might otherwise be traded in the fiat markets (increasing supply) stays in the altcoin markets instead. When traders transition from trading BTC/USD to altcoins, they reduce the available BTC/USD supply.

Bitoin cannot do everything that a decentralised platform needs to do. Bitcoin is a store of value like gold, while altcoins do everything else. Only shitcoins dilute the value of bitcoin

If he/she is a simple person who created BTC, there should be protrusions on the other side. As we always try to be the strongest than others, greed will always be in every place.
I guess altcoins do not have much impact on the Bitcoin. The only asset that can be traded is not cryptocurrency, there are plenty of way for making money. What do you think can we include Forex to this list?

But this argument can be easily reversed

For example, if people didn't invest in altcoins (for the hypothetical lack of them, obviously), they would invest in Bitcoin instead. Indeed, some people would likely refrain from investing in crypto altogether (as crypto would be Bitcoin alone), but they would definitely be in the "overwhelming" minority, so to speak

If anything, people would rather not invest in altcoins than avoid investing in Bitcoin. In this way, without altcoins being around more money would get poured into Bitcoin, and so its price would be way higher. What do you guys think? Does it count as a valid argument (read, an irresistible proof) in favor of the value dilution hypothesis?

I don't think altcoins dilute the value of bitcoin. It could be the other way around. The strongest network (bitcoin's) grows even more and attracts users from the weaker networks, diluting the value of the weaker networks. Give it time, and bitcoin will suck up value not only from the altcoins, but from fiat money too.

I think that without altcoin, bitcoin will still be fine, but if there is no altcoin, maybe the price of bitcoin will be difficult to stabilize because it is always played by the whales. So even though bitcoin still needs an altcoin so that the price of bitcoin becomes more stable because, with the altcoin, the target of the investors becomes divided.

I have no issues with major altcoins either

For example, everyone (and his dog, of course) here knows that I'm massively pro-Litecoin as I see it supplementing Bitcoin where it fails (and it fails as a means of payment if anyone is curious). But that is not my point here. I just want to hear what arguments people can come up with either to prove or disprove the thesis of this topic, i.e. altcoins diluting Bitcoin's value


To put it differently, this topic shouldn't be considered a dispute whether altcoins are bad or good but rather whether they take value from Bitcoin or not, without making any value judgments about it (pardon the pun)

Well tbh, I don't see anything wrong with altcoins gaining value side-by-side with bitcoin if they have something to offer, but the apparent pump-and-dump nature of altcoins is what gets me, really, considering that most are just made to fatten the pockets of their developers and team. Now, you won't really be sure about everyone liking bitcoin as they still have their preference over what coins would they put their money on, so the notion that altcoins are sharing bitcoin's supposed value is wrong. Not that I'm pro-altcoins but it's just hard to be one-sided on things that has open-ended and vague point-of-views and outcomes.


If Bob likes something but bitcoin couldn't offer it, he wouldn't buy it. However if Bob saw what he was looking for on another coin, he'd most definitely buy it and stick with it. The way I see it, it's like just your regular restaurant: majority would recommend A simply because a lot of people recommends it too, but your picky taste buds love to mingle with exotic foods and so you go to restaurant X.

Being the First Cryptocurrency, Bitcoin would always be the "traded-currency." I think because it's the first, it would stay first. A lot of people already know it, and a lot of investments have gone through it. Lots of scandals, death proclamation and different things have happened, but it is still number one. It gives value to other coins and not the other way around. The amount is always going to be like that but in the end (21M coins) will stop, we will see what happens.

I'm just curious that once that it reached that, would there be still solving cryptographic puzzles to verify blocks? I think I have read it, but I forgot.

Everyone and his dog know that the supply of bitcoins is limited to 21M coins, so on purely technical terms (if we discard the fact that not all coins have been mined so far) Bitcoin supply is firmly capped. This is often used to support the claim that Bitcoin is deflationary with the meaning being that its price is set to rise due to this fact

With that said, though, it is also claimed that altcoins are effectively making Bitcoin supply unlimited, i.e. without them Bitcoin price would be higher. In this manner, they are taking value from Bitcoin as if its supply were in fact constantly expanding. Indeed, not all altcoins are born equal and it is not likely either that a multitude of shitcoins out there can make a serious dent in Bitcoin's value, if at all (as most of them are abandoned by now anyway). But there are other, more precious pebbles on that beach

Major altcoins such as Litecoin, Ethereum, BCash, maybe, a couple others are not something to be sneezed at and then discarded as completely inconsequential. It could be said that they are making crypto better known to the wider public and thus contributing to Bitcoin's value as well, so things are more complicated than they first appear to be. So what is your stance on this matter? Would Bitcoin fare better without altcoins sticking around? Are they taking value from Bitcoin at the end of the day?



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