Bitcoin’s smaller rivals are eroding its share of the $2 trillion digital currency market. Of the dozens snapping at its heels, most have little use beyond financial trading – but few of the investors fueling their rise seem bothered.
Among the major “altcoins” – as all cryptocurrencies aside from bitcoin are known – some such as Ethereum aspire to be the backbone of a future financial system. Others, like Dogecoin, have no such ambitions, and are barely used in payments or business.
For the army of retail punters pouring money into them, their backstory – and the inherent volatility that exposes those who invest in them to potentially heavy losses – often matter little.
Instead, buyers see the chance of quick profit, or at least an entertaining ride.
‘OH, THIS IS FUN’
Demi Staal, a 27-year-old electrical engineer based in The Hague, holds a portfolio of altcoins worth around $8,000.
Among his previous plays: a 30 euro ($36) bet on Shiba Inu, a Dogecoin spin-off that briefly became one of the 20 biggest cryptocurrencies this month.
“I think it’s a joke coin, just like Dogecoin,” said Staal, who doubled his money on that transaction. “I saw it listed at my exchange a few days ago and was like ‘oh, this is fun, I’ll buy this’.”
Along with prospects of fun and gains, however, altcoins are plagued by volatility.
Such swings in price can leave investors heavily out of pocket and, unlike bitcoin and depending on the regulatory framework of the exchange on which they are bought, many can only be swapped on exchanges for other digital coins rather than cashed in for hard currency.
As investors pile into rivals, Bitcoin’s share of the crypto market has slumped to around 45% from 70% this year, according to U.S. researcher Coin Metrics, while its trading volume share at major exchange Binance has halved to 23%, data provider CryptoCompare says.
Its market limit remains around $800 billion and, while all cryptocurrencies are still outside the regulatory framework of the mainstream global financial system, they are more widely accepted for payments than their peers.
The second largest coin Ethereum is coming up, having increased to about $380 billion over four times this year since more peers began using their blockchain “decentered finance” cryptographic platforms.
The surge of Ethereum has generated wider interest in Altcoin from cash to burn retail investors, part of the trend that has also encouraged the use of trading applications such as Robinhood and has led to a social media rally in inventories including GameStop Corp.
“The fact (the crypto market) is 24/7 makes it more accessible for people who are working,” said Amar Rai, a 25-year-old risk consultant whose crypto investments have doubled since March last year.
WHO LET THE DOGE OUT?
Half a dozen other altcoin investors, all men in their 20s, told Reuters they based their decisions on information gleaned from sites like Reddit, Twitter and TikTok.
As coins such as Ethereum – whose backers say it will transform finance – grow, that use of social media trends as a reference point has meant others with few such prospects have also ballooned.
Take Dogecoin: Started as a joke in 2013, its logo features a Shiba Inu dog widely used in memes. But that has not dented its ascent.
It has soared over 10,000% this year to becomes the fifth-biggest token with a market cap of over $60 billion, but that rise has not coincided with any growth in mainstream usage for payments, and with an unlimited supply it lacks the scarcity that has attracted inflation-warier investors to bitcoin.
It gained momentum from Tesla boss Elon Musk’s tweets, rather than that of a prominent supporter.
Dogecoin jumped around 25 percent last week, after Moscow told developers that it worked to improve its efficiency. He had sunk by a third before Musk called him a “hustle.”
Staal, the Hague investor, said that after buying Dogecoin, he had lost recently.
“A few weeks ago, I bought for fun only,” he said. “I put in just a few hundred euros. However – I bought it at the wrong time – it didn’t pan out for me.”
The food chain is further down Shiba Inu, which in the four days to 11 May increased to more than 2.000 percent.
The individual coins of the Dogecoin Spin-off are a fraction of a cent and are of little use in practice. The website calls it “an experiment in the decentralized spontaneous construction of the community.”
This translates into profit for Vancouver’s 24-year-old plumber Austin Alexander.
“I’m interested in funds,” he said, four weeks ago, after starting to buy Shiba Inu. “It’s interesting the technology behind it, but the money gets to me.”
According to CryptoMarketCap, the spinoff remains valued at around $6 billion, but it has fallen 60% in the last week.