Are Cryptocurrencies feeding on themselves to become bigger and bigger?

in cryptocurrency •  9 months ago

Basic concept

The idea goes that bitcoin rises and then falls, money looking for more gains move to alts which then in their turn rise and fall. This continues and at the end of each cycle both bitcoin and the main alts are higher.

This is a well wore idea that certainly has some merit. Indeed I take it into account when I make a trade, where am I in the cycle.

The why

But what stops me trading this cycle more aggressively is the why.

The why seems quite simple, and already stated above, people are moving on to the next pump in the search of gains.

My problem is that most investors are doing this blindly, BTC up more than DASH, lets sell BTC and buy DASH it's turn will be soon. Will it though? is there a reason other than the psychology of the trader that links these two?

I would say in many cases no. And if this trading strategy is flawed, the market will likely figure it out sooner than later and close the opportunity.

When does it/ should it work

If it is flawed in many cases, what are the cases it is not flawed in?

Bitcoin

The main synergy I see with bitcoin, is litecoin and/or bitcoin cash.

I don't think much of the argument of cheaper transactions for either of these alts. As there are still nowhere near capable of handling a large number of transactions. While they may do better than bitcoin if they had bitcoins daily transactions, they would still be too slow and expensive to be useful.

The synergy, or possibility of one that I see is in them being used as a test bed for bitcoin. This use case has most aggressively been put forward by the litecoin side. The idea that segwit was first forked onto litecoin and only after it was shown to be safe did bitcoin adopt it.

It would give these alts a use case that links them to bitcoin and could justify the symbiotical movements of one pulling the other up as each become stronger as the other becomes stronger.

Would love to hear thoughts on what other coins are symbiotic to bitcoin and why.

Ethereum

For ethereum I think the case for a mutually beneficial relationship, with some of it's tokens, is much stronger. As it is built as a platform it seems clear that as ethereum becomes stronger the potential for it's tokens becomes stronger. And if a token becomes more widely used the ethereum network is clearly strengthened.

The main risk here is that as it is so easy to build a token on ethereum it undoubtedly has an outrageously high number of %$!#coins. And while they will likely move with ethereum for a while, eventually they will crash if indeed they are %$!#coins.

So in this case it is important to pick the write token.

Conclusion

If you are trading these cycles, be careful that there is an underlying reason, because if there's not it could come to a quick end, and if you are the wrong side of the trade the 'one time' it doesn't work could be the time the hurts you badly.

Thanks for reading.




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@kevinbacon. Interesting concepts. I am particularly looking closely at Ethereum. The cheapest I remember it being is $5 and a year or so ago. And now it has just gone to the moon. I think it is going to continue to rise and is definitely a good buy and hold coin. It is one of what I call the "staple" coins. Following you.

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'staple' coin, I like it. What are your staples? for me ETH, BTC, STEEM, basket of privacy coin DASH XMR and ZCASH. To be clear I don't think all the privacy coins are staples but one of them could become one

Thanks for explaining the cycles , most of us newbies in cryptocurrencies just do things impulsively. I will make some research before making a big step into any crypto. Though for now, i will rely on some luck somehow.

very interesting...