Bitcoin and Ether have cemented their positions as the top two cryptocurrencies in terms of market capitalization—but the recent bull run has delivered some big changes a little further down the rankings.
Back in December 2017, when BTC hit $20,000 for the first time, altcoins such as Bitcoin Cash, XRP and Litecoin were firm favorites in the top five. Tether and Binance Coin were nowhere to be seen among the 20 biggest coins. Some, like Polkadot, didn’t even exist.
Fast forward to 2021, and the rundown of the 10 biggest cryptocurrencies by market cap looks very different indeed. While several digital assets have gone from strength to strength, others have fallen out of favor with investors. Some are fighting for their survival.
So: What are the coins to watch? Which ones are at risk of losing their clout? And is Ether’s vice-like grip on the No. 2 spot in peril? This is the current state of the top 10.
As altcoins jostle for prominence, Bitcoin is likely to lose little sleep over its position as the world’s No. 1 cryptocurrency. Despite being dealt a bloody nose on Feb. 23 after suffering a flash crash that took its price as low as $45,000, a staggering $710 billion separates its market cap from that of its nearest competitor, Ether.
This isn’t to suggest that BTC doesn’t have challenges ahead. A recent Gartner survey found just 5% of finance executives are planning to hold Bitcoin as a reserve asset in 2021—suggesting that we might not see too many more box office announcements from publicly listed companies following Tesla’s lead. A dearth of publicity could stymy BTC’s momentum, and mean the battle to hit six figures will fall to retail investors.
Worse still, a Feb. 18 report from JPMorgan warned that Bitcoin is overvalued at current levels—setting a “fair value range” of between $11,000 and $25,000. The bank added: “Market liquidity is currently much lower for Bitcoin than in gold or the S&P 500, which implies that even small flows can have a large price impact.”
Further tumbles in BTC’s price could tempt some investors to take profit off the table, and conclude that the best of the bull run has been and gone. We’d then need to address the other elephant in the room: What will happen when institutions decide they want to sell their holdings. With Santiment research suggesting that the sale of 2,700 BTC over the weekend may have sparked this week’s gruesome sell-offs, what will happen if MicroStrategy and Tesla—which own tens of thousands of coins between them—call it a day?
Ether, and the Ethereum killers
Ether comfortably outperformed Bitcoin in 2020, a theme that has continued so far this year. But after falling as low as $1,378.84 on Feb. 23—a far cry from the $2,036 recorded over the weekend—the wind may have been knocked out of the altcoin’s sails.
The big threat for the No. 2 cryptocurrency concerns the agonizing wait for an upgrade to Ethereum 2.0, moving the blockchain over to a Proof-of-Stake consensus mechanism.
Creaking under the strain of congestion caused by DeFi protocols and non-fungible token marketplaces—with both sectors exploding in popularity— average transaction fees on the network have now hit an eye-watering $30.19.
Exasperated, a number of projects are now jumping ship to rival blockchains where transactions are much less expensive—and transaction throughput is higher. Binance Coin has been a big beneficiary of this. Last week, it surged by a staggering 142.8% in the space of seven days, hitting highs of $342.88 at one point. Despite concerns about centralization, the Binance Smart Chain has proven a hit with developers. A big milestone came when trading volumes on PancakeSwap, a decentralized exchange based on BSC, overtook those on Ethereum-focused Uniswap.
It’s clear that Binance CEO Changpeng “CZ” Zhao has his sights firmly set on flippening Ether—and he’s been vocal on Twitter about his blockchain’s success:
Polkadot and Cardano, both blockchains that have also been called Ethereum killers, also fit into this narrative. These two cryptocurrencies are continually changing places between No. 5 and No. 6 right now—with each offering greater levels of scalability. As a report by Outlier Ventures recently showed, developers are flocking to these networks slowly but surely… something that’s crucial for adoption to grow.
As interoperability becomes the name of the game, it’s possible that one of these “Ethereum killers” will struggle to overtake Vitalik Buterin’s brainchild in second place. But the bigger question is this: Can these young upstarts keep the momentum going when ETH 2.0 finally launches?
Tether settles lawsuit, XRP’s fight continues
Tether has every opportunity to retain the No. 3 spot after a black cloud was lifted. On Feb. 23, the stablecoin issuer and its parent company Bitfinex announced that they had reached a settlement with New York’s attorney general. The long-running dispute centered on allegations that Tether had misrepresented the extent that USDT coins were backed by physical dollars. As part of the deal, the companies will pay $18.5 million in damages, report reserves every three months, and will no longer serve customers in New York. Tether doesn’t have to admit wrongdoing under the terms, either.
The settlement comes as XRP remains in the crosshairs of the U.S. Securities and Exchange Commission, which is accusing Ripple of holding an ongoing, unregistered securities sale. Ripple suffered another setback after MoneyGram suspended the use of RippleNet—a big blow considering the remittances giant was a high-profile user. XRP’s current position of No. 7 is a stark contrast to the No. 3 position it enjoyed for years.
Chainlink’s future looks bright as an explosion in smart contract functionality across the blockchain space continues. The decentralized oracle network has already inked partnerships with the likes of Binance Smart Chain and Polkadot—and it’s the top pick of DeFi projects including Aave, Synthetix and yearn.finance.
Rounding off the top 10, we have Litecoin and Bitcoin Cash. Their days in the top five may be over, but there’s every opportunity for these payment-focused coins to thrive—especially if PayPal and Mastercard succeed in making cryptocurrencies a more common method for completing transactions. LTC bills itself as the “future of money” because of how it allows payments to be sent across borders cheaply—and BCH, which is reeling from a dramatic hard fork in November, proclaims that it offers “better money for the world.” But with both coins proving to be even more volatile than Bitcoin during Tuesday’s sell-offs, critics will undoubtedly question whether consumers would want to pay for their cappuccinos with an asset that can tumble by 20% in a matter of hours.
Each digital asset is fighting its own demons in this period of unprecedented growth in the crypto sector—the recent crash notwithstanding. Expect changes in the make-up of the top 10 as 2021 continues… and March, traditionally a traumatic month for digital assets, gets underway.