Cryptocurrency markets show diversity, but bitcoin’s not done yet
Regulations and a growing focus on tech potential may impact the market, but bitcoin's still king.
Cryptocurrency market prices over the last 24 hours at the time of writing, according to CoinMarketCap, are a refreshing blend of red and green that's been absent for a while. Over the last day bitcoin moved in a neat 12 hour up and 12 hour down cycle, showing a 24 hour change of only -0.10% at the time of writing.
The 12 hour shifts were broadly echoed across most of the top 20 coins by market cap as sellers cash in the gains of yesterday. The coins in the red at the time of writing mostly followed this pattern. But many other coins are deviating from the usual script and not mirroring bitcoin so neatly. This is relatively unusual.
It might also be a good sign. In a letter to clients on 6 February, Goldman Sachs analyst Steve Strongin described the market's usual synchronisation as a worrying sign.
"The high correlation between the different crypto currencies worries me," Strongin wrote. "Contrary to what one would expect in a rational market, new currencies don't seem to reduce the value of old currencies; they all seem to move as a single asset class."
A sign of the times
One shouldn't read too far into a rough eyeballing of 24 hour price movements, but Strongin suggests that greater variation of prices, and less synchronicity, might be signs of a maturing market.
The recent stock market meltdown might be related. Business Insider notes that a lot of money was pouring into cryptocurrency while the stock market was plummeting, especially to the top three coins by market cap (Bitcoin, Ethereum and Ripple), and it looks like some of that money stayed and diversified.
Notable gains in the last 24 hours include the stablecoin system DigixDAO (DGD, up 35%), the decentralised marketplace token Syscoin (SYS, up 17%), the off-chain smart contract network Aeternity (AE, up 15%) and the gambling ecosystem token FunFair (FUN, up 13%).
Other than that, most coins are hovering in the -10 to +10% range over the last 24 hours.
The maturing marketplace
Bullish news in recent days, such as in the US senate banking committee hearing and from South Korea's finance minister, was largely focused on the potential applications of cryptocurrencies and distributed ledger technology in particular.
These stamps of approval on the underlying technology might start shifting the interest of new money away from the price tags and towards applications of the technology. The same widely publicised hearings also emphasised the role of tighter regulation around cryptocurrencies, and ICOs in particular.
This, too, may signify a move away from the gold rush mentality that characterised late 2017, and inject a dose of stability into the market going forwards.
In some ways the market has been developing backwards. Functional coins may be a necessary precursor to cryptocurrency regulation, and the smart money might start landing there instead of just sitting on bitcoin.
However, it's still not possible to divorce bitcoin from the rest of the cryptosphere. It still boasts by far the largest market cap of any coin, and a tellingly outsized daily trade volume which highlights its current role. To actually get at some of the more obscure function coins, especially if you want to get in early, you still need to go through bitcoin.
There are signs of growing maturity and diversification in the cryptocurrency markets but bitcoin is still sitting at the centre of it all. Depending on your perspective it's either a heart of gold or a rusty anchor.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM