Altcoins like Ethereum may soon benefit from institutions rushing to buy Bitcoin 🚨 This article is 5 years old...
Altcoins like Ethereum may soon benefit from institutions rushing to buy Bitcoin
2 min read
Updated: May. 24, 2020 at 11:09 pm UTC
Photo by Beau Swierstra on Unsplash
As evidenced by various interviews, Twitter comments, and data sets, institutions have finally started to enter the cryptocurrency market en-masse. Wall Street’s focus thus far has been Bitcoin.
But an analyst expects institutional players to expand their horizons to include top altcoins in the future, citing data from exchange Coinbase regarding the behavior of investors.
Institutions could leap to altcoins after dabbling in Bitcoin
In a blog post published on May 13, leading cryptocurrency exchange Coinbase indicated that while Bitcoin is by far the most popular digital asset on the platform, it acts as a sort of “gateway drug” to altcoins.
Their data found that out of all the accounts registered in 2019-2020, “with at least 5 purchases on Coinbase.com,” a mere 24 percent stick exclusively with investing in Bitcoin, while the rest “eventually buy other assets” — or altcoins.
According to Messari’s Ryan Watkins, the propensity that Coinbase users have to migrate to altcoins over time rather than sticking with Bitcoin might be reflected in institutions “over time”:
“Bitcoin is by far the leading cryptoasset and perhaps the most important, but Coinbase customer data shows that new users generally begin to look for alternative assets and use cases. […] I imagine institutions will behave similarly over time.”
Ethereum seems to be the most obvious bet after Bitcoin, especially since it just got its first U.S.-regulated futures contract and since the project is being supported by companies like Reddit, IBM, and more.
Bitcoin remains the best crypto bet
While there are already some institutions delving into altcoins, as evidenced by Grayscale’s Q1 2020 investment report that signaled enormous hedge fund support for Ethereum, institutional players themselves have said that Bitcoin is the best bet when it comes to cryptocurrencies.
After all, aside from Ethereum and Tether’s USDT, it is the only liquid cryptocurrency, especially when you’re talking about institutional players that trade millions.
Paul Tudor Jones, a legendary macro hedge fund manager worth over $5 billion, released a note on Bitcoin last week titled “The Great Monetary Inflation.”
While he did not directly bash altcoins, he made it clear that the reason why he chose Bitcoin as an alternative investment over, say, Ethereum is that the original cryptocurrency has the characteristic of “quintessential” scarcity that is hard to replicate in other assets — let alone other cryptocurrencies.
This thought process has been echoed by investors like Raoul Pal — a former Goldman Sachs executive and the current chief executive of Real Vision.
The Wall Street veteran indicated in a number of interviews that if you truly believe cryptocurrency is the future, Bitcoin is automatically the most reliable bet, with Pal branding BTC the “call option” on a decentralized and digital economy.
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In this article
Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
Ethereum
$3,352.85
Ethereum is a decentralized, open-source blockchain platform that enables the creation of smart contracts and decentralized applications (DApps).
Coinbase
Coinbase is a digital currency exchange and wallet service that allows individuals to buy, sell, and store digital currencies, such as Bitcoin, Ethereum, and Litecoin.
Goldman Sachs
Goldman Sachs a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals.
Messari
Messari is a fast growth startup in New York that is building the next generation data layer for the global cryptoasset community.
A former hedge fund manager who retired at 36, Raoul Pal is a co-founder of Real Vision, a financial media company offering in-depth video interviews and research publications from the world’s best investors.
