Im not trying to force Bitcoin to be the one true coin. Im just commenting on the effect of speculative investors undermining the value of what they are investing in  because if the future value could go down even if altcoin market grows then no coins are as good of an investment and their value should fall as people figure this out

Yeah exactly. However, the bitcoin share of 1/21000000th is dilluted when other coins 'plug in' via an exchange. The bitcoin is now 1/(21000000+others)

When the total value of the others was low the effect on the value of a bitcoin was negligable. The total size of the ecosystem attached to Bitcoin was growing so was its value.  Now that there is considerable interest starting to generate for investment in other coins the 'other' is starting to have a dillution effect. Once investors realise this they will realise it is not as safe a store of wealth as they previously thought, prompting them to withdraw from crypto currency and the value to crash.

Cryptos will still go on as a transaction option but not as strong as an investment option.

I admit that there is a bit of a moat provided by transaction fees and the ability of smart people to develop a viable user base. That is a lot less secure than the limited number of coins.

The developer talent is scarce now and holding back the rate of new coins but as cryptos become more established this will grow.

I believe they are innovations and better. Bitcoin is the myspace of cryptos but picking the facebook over the G plus is more difficult.

POS and ETH are likely to be disrupted too by the next best thing. This makes it possible / likely that their future value will decrease. Tbis fact makes investing less inviting.

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We are already seeing what? Bitcoin didn't drop from 90% of the total market value until POS and ETH arrived, which are innovations, not clones.

I'll believe your paradox is valid when I see it--my hunch is that Bitcoin will be replaced atop the leaderboard by disruptive innovation.
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Limited supply AND strong demand

Because Bitcoin has the name and was growing fastest. The others were insignificant and likely to be fizzle out. But now they are starting to affect the price of Bitcoin. It is this increasing competition that brings into play the paradox making all crypto curriencies an unsafe investment driving people to pull their wealth out. Their growth is a threat to their growth.

Thats my point of the paradox. They undermine the premise.

The supply of modern money is controlled by central banks to control the rate of inflation to promote investment and prevent hording.

The blockchain tech is useful but not interently valuable. If it was changed so that anyone could add as many coins to the network as they liked the value of the coins would be nothing.

Only if the rate of money coming in is greater than the number of coins. There is a finite number of people and an infinite possible number of coins. When people realise this they will exit driving a crash

It dosent take a genius to copy paste and promote to the next generation who dont want to drive up the price of existing coins,
 ad infinite. As new coins grow they offer better returns and the existing ones suffer inflation.

Economics 101 says it does. Thats why the difficulty needs to increase as the hash rate increases

Bitcoin is valuable because of its scarcity. The limited number of coins and the fact that it is controlled by software and agreement of the miners, unable to be manipulated by any government is what makes Bitcoin valuable. Trust in this is what drives Bitcoins value and growth.

However, recently there has been a lot of growth in competing crypto currencies, with people looking to invest in a cheaper option with more growth potential, to the point that the price of Bitcoin has been affected. This ammounts to uncontrolled inflation of the total number of crypto currencies undermining the scarcity and undermining the entire premise that gives crypto currencies value. As the number of crypto currencies approaches infinity the value of all currencies approaches zero.

The only moat is acceptance of one currency and not others, but with the establishment of exchanges this is defeated. It would be like using amex or visa or MasterCard, but the number of currencies is not limited by the system like the number of payment systems because the conversion can be completed by the user prior to the transaction. I see no real moat to stopping uncontrolled inflation by an ever increasing  ecosystem of crypto currencies.

There will always be an incentive to create a new currency every few years so that those new to the market can be an early adopter, rather than push up the price of an existing currency and make those who came before richer. Cryptos will become a payment system like paypal and not a store of wealth. Value will be stored in fiat currency and converted at point of transaction.

Therefore the growth in alternate crypto currencies paradoxically dooms all to worthlessness.