Why Bitcoin's Market Power Is Fading as Crypto Ecosystem Matures

Bitcoin, the largest cryptocurrency by market value, more than 35% off its 2019 highs through Tuesday, is losing its power as the driving force of the cryptocurrency world, as outlined in a recent Bloomberg report. According to several market experts, this is the result of a "maturing" of the digital currency "ecosystem." Per their latest findings, Bitcoin’s price moves are being driven by competing digital currencies and new blockchain technologies. 

Bitcoin's 'Coming of Age'

While other market watchers have attributed Bitcoin’s rocky ride in 2019 to disappointments like the International Exchange Inc.’s (ICE) new futures contracts, an accumulation of technical bearish signals, and other headwinds, alternative data provider Indexica points to another downward driver. 

 Zak Selbert, chief executive officer at Indexica, explains Bitcoin’s sensitivity to the development of competitors as “just another sign of a coming of age,” per Bloomberg. In a new development, Indexica found that Bitcoin’s strongest predictive measure was its “quoteability,” which showed that it was most often talked about in conjunction with more traditional currencies.

Bitcoin's Place in the Financial Landscape

The latest findings, based on data from Aug. 1 through Oct. 1, supports the notion that Bitcoin’s woes have more to do with an expanding cryptocurrency ecosystem than the actual coin itself, per Bloomberg. Indexica pointed to specific instances such as the announcement of Mastercard Inc.’s (MA) partnership with enterprise software provider R3 to establish a blockchain solution for cross-border payments.

 “Now that Bitcoin is a big kid, anything can make it move, just like anything can make gold or a G-10 currency move,” said Selbert. “Bitcoin is part of the financial landscape in a very intertwined and mature way.

While Bitcoin accounts for a majority of the cryptocurrency world’s assets by market value, it is not the most widely used cryptocurrency, as outlined in another Bloomberg report. According to CoinMarketCap.com data, Tether has the highest daily and monthly trading volume out of the digital coins, although its market value is roughly 30 times smaller. 

What’s Next? 

Predicting bitcoin’s future price is a tough game for anyone. Even bulls who expect the cryptocurrency to bounce back again from its slump, with some just waiting out for the new Bakkt futures exchange to gain traction, should be sure to buckle up for what’s bound to be a bumpy ride.