Once Untouchable, Bitcoin’s Market Dominance Fades

Anyone who keeps an eye on the cryptocurrency markets may have noticed a real tendency for coin values to play follow-the leader. Bitcoin’s first-mover market advantage has allowed it to maintain its stronghold, and its global fame has made it an increasingly valuable store of value and alternative currency for nations struggling to maintain stable fiat currencies. However, Bitcoin also suffers from some technical limitations that are raising real challenges for new applications.

Thus far, cryptocurrency markets largely have been driven by speculation. Investors watch the indexes and buy when the trends are bullish and sell when the market turns. This has created a great deal of volatility, particularly in the first half of this year.

However, as cryptocurrency and the blockchain technology that underlies it continues to evolve, coin investments are becoming increasingly value driven. As a result, Bitcoin may soon lose its leadership position in the world crypto markets as the next-generation cryptocurrencies offer greater incentives for value-based investors.

Value-Based Investors Look to Altcoins

Bitcoin’s scalability problem is the elephant in the room that the hardcore HODL community is glad to ignore. There are scores of articles explaining the technological limitations that prevent the Bitcoin network from being able to process enough transactions to make it useful on the global scale, so there is no need to bore you with the details. But suffice it to say that the Bitcoin blockchain is slow and cumbersome – especially compared to the up-and-comers in the crypto markets.

Currently, the Bitcoin blockchain can process around 3 transactions per second. Of course, this depends on the mining capacity committed to the coin at any given time, as well as the number of transactions that are being processed through the network.

Just to give you an idea of how painstakingly slow this is on the scale of global finance, credit card giant Visa is capable of processing up to 24,000 transactions per second – and that’s using the old-school centralized network that the company built ages ago. Ripple (XRP), which uses its own payment channel capable of processing transactions at a comparable speed, is Visa’s only real competitor at the moment, but there are several new coins that are comping up in the global payments market.

The Next Bitcoin?

Bitcoin was the world’s first virtual currency, allowing it to dominate the market that was created around it and its successors for most of the past decade. In fact, coin prices across the market move in near lock-step with Bitcoin value. However, given that the various altcoins offer very different values to the larger global finance market, these correlations will begin to break down as speculation begins to give way to more value-based market activity

There are several candidates for coins that could become the next Bitcoin. Ripple CEO Brad Garlinghouse certainly believes that he’s backing a winner, and the XRP coin recently overtook Bitcoin Cash as the third most-popular coin by market cap.

Ethereum – valued as the originator of the smart contract – has maintained a solid market position behind Bitcoin for several years now, even briefly overtaking the market leader and claiming the coveted number-one position for a short time last year. Otherwise, coins designed to afford users increased privacy protections like Dash and Monero have multiplied their market share over the past several months.

Granted, Bitcoin remains the clear market leader, boasting a total market cap of around $130 million and a trading volume of over $5 billion at press. However, as virtual currency markets continue to diversify, Bitcoin’s market share is starting to spread thin. As cryptocurrency investments become more and more mainstream, there will be a greater proportion of value-based coin buys. This may very well leave Bitcoin in the dust, at least so long as scalability continues to be a problem for the current crypto king.