On value dilution

[deisik]

Everyone and his dog know that the supply of bitcoins is limited to 21M coins, so on purely technical terms (if we discard the fact that not all coins have been mined so far) Bitcoin supply is firmly capped. This is often used to support the claim that Bitcoin is deflationary with the meaning being that its price is set to rise due to this fact

With that said, though, it is also claimed that altcoins are effectively making Bitcoin supply unlimited, i.e. without them Bitcoin price would be higher. In this manner, they are taking value from Bitcoin as if its supply were in fact constantly expanding. Indeed, not all altcoins are born equal and it is not likely either that a multitude of shitcoins out there can make a serious dent in Bitcoin's value, if at all (as most of them are abandoned by now anyway). But there are other, more precious pebbles on that beach

Major altcoins such as Litecoin, Ethereum, BCash, maybe, a couple others are not something to be sneezed at and then discarded as completely inconsequential. It could be said that they are making crypto better known to the wider public and thus contributing to Bitcoin's value as well, so things are more complicated than they first appear to be. So what is your stance on this matter? Would Bitcoin fare better without altcoins sticking around? Are they taking value from Bitcoin at the end of the day?



Feel free to comment below as well as vote above and make your voice heard while your opinion known

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[crwth]

Being the First Cryptocurrency, Bitcoin would always be the "traded-currency." I think because it's the first, it would stay first. A lot of people already know it, and a lot of investments have gone through it. Lots of scandals, death proclamation and different things have happened, but it is still number one. It gives value to other coins and not the other way around. The amount is always going to be like that but in the end (21M coins) will stop, we will see what happens.

I'm just curious that once that it reached that, would there be still solving cryptographic puzzles to verify blocks? I think I have read it, but I forgot.

[dothebeats]

Well tbh, I don't see anything wrong with altcoins gaining value side-by-side with bitcoin if they have something to offer, but the apparent pump-and-dump nature of altcoins is what gets me, really, considering that most are just made to fatten the pockets of their developers and team. Now, you won't really be sure about everyone liking bitcoin as they still have their preference over what coins would they put their money on, so the notion that altcoins are sharing bitcoin's supposed value is wrong. Not that I'm pro-altcoins but it's just hard to be one-sided on things that has open-ended and vague point-of-views and outcomes.


If Bob likes something but bitcoin couldn't offer it, he wouldn't buy it. However if Bob saw what he was looking for on another coin, he'd most definitely buy it and stick with it. The way I see it, it's like just your regular restaurant: majority would recommend A simply because a lot of people recommends it too, but your picky taste buds love to mingle with exotic foods and so you go to restaurant X.

[deisik]

Well tbh, I don't see anything wrong with altcoins gaining value side-by-side with bitcoin if they have something to offer, but the apparent pump-and-dump nature of altcoins is what gets me, really, considering that most are just made to fatten the pockets of their developers and team. Now, you won't really be sure about everyone liking bitcoin as they still have their preference over what coins would they put their money on, so the notion that altcoins are sharing bitcoin's supposed value is wrong. Not that I'm pro-altcoins but it's just hard to be one-sided on things that has open-ended and vague point-of-views and outcomes

I have no issues with major altcoins either

For example, everyone (and his dog, of course) here knows that I'm massively pro-Litecoin as I see it supplementing Bitcoin where it fails (and it fails as a means of payment if anyone is curious). But that is not my point here. I just want to hear what arguments people can come up with either to prove or disprove the thesis of this topic, i.e. altcoins diluting Bitcoin's value

If Bob likes something but bitcoin couldn't offer it, he wouldn't buy it. However if Bob saw what he was looking for on another coin, he'd most definitely buy it and stick with it. The way I see it, it's like just your regular restaurant: majority would recommend A simply because a lot of people recommends it too, but your picky taste buds love to mingle with exotic foods and so you go to restaurant X.

To put it differently, this topic shouldn't be considered a dispute whether altcoins are bad or good but rather whether they take value from Bitcoin or not, without making any value judgments about it (pardon the pun)

[daarul50]

I think that without altcoin, bitcoin will still be fine, but if there is no altcoin, maybe the price of bitcoin will be difficult to stabilize because it is always played by the whales. So even though bitcoin still needs an altcoin so that the price of bitcoin becomes more stable because, with the altcoin, the target of the investors becomes divided.

[butka]

I don't think altcoins dilute the value of bitcoin. It could be the other way around. The strongest network (bitcoin's) grows even more and attracts users from the weaker networks, diluting the value of the weaker networks. Give it time, and bitcoin will suck up value not only from the altcoins, but from fiat money too.

[deisik]

I don't think altcoins dilute the value of bitcoin. It could be the other way around. The strongest network (bitcoin's) grows even more and attracts users from the weaker networks, diluting the value of the weaker networks. Give it time, and bitcoin will suck up value not only from the altcoins, but from fiat money too

But this argument can be easily reversed

For example, if people didn't invest in altcoins (for the hypothetical lack of them, obviously), they would invest in Bitcoin instead. Indeed, some people would likely refrain from investing in crypto altogether (as crypto would be Bitcoin alone), but they would definitely be in the "overwhelming" minority, so to speak

If anything, people would rather not invest in altcoins than avoid investing in Bitcoin. In this way, without altcoins being around more money would get poured into Bitcoin, and so its price would be way higher. What do you guys think? Does it count as a valid argument (read, an irresistible proof) in favor of the value dilution hypothesis?

[mrdeposit]

If he/she is a simple person who created BTC, there should be protrusions on the other side. As we always try to be the strongest than others, greed will always be in every place.
I guess altcoins do not have much impact on the Bitcoin. The only asset that can be traded is not cryptocurrency, there are plenty of way for making money. What do you think can we include Forex to this list?

[Crypdon]

Bitoin cannot do everything that a decentralised platform needs to do. Bitcoin is a store of value like gold, while altcoins do everything else. Only shitcoins dilute the value of bitcoin

[exstasie]

With that said, though, it is also claimed that altcoins are effectively making Bitcoin supply unlimited, i.e. without them Bitcoin price would be higher. In this manner, they are taking value from Bitcoin as if its supply were in fact constantly expanding.

There might be some element of this happening, a "dilution" of sorts. But I think it's probably outweighed by the effect altcoin markets have on the circulating BTC supply.

The altcoin markets reduce available supply in the BTC/USD (and other fiat) markets for multiple reasons. People buy BTC to send to altcoin exchanges. In addition, speculative BTC that might otherwise be traded in the fiat markets (increasing supply) stays in the altcoin markets instead. When traders transition from trading BTC/USD to altcoins, they reduce the available BTC/USD supply.

[eaLiTy]

Major altcoins such as Litecoin, Ethereum, BCash, maybe, a couple others are not something to be sneezed at and then discarded as completely inconsequential. It could be said that they are making crypto better known to the wider public and thus contributing to Bitcoin's value as well, so things are more complicated than they first appear to be. So what is your stance on this matter? Would Bitcoin fare better without altcoins sticking around? Are they taking value from Bitcoin at the end of the day?

I will be personally happy if the entire crypto market consist of bitcoin alone and a few anon and stable coins rather than tons of other coins, i am sure the market will be much better than it is now if there are a few coins, the problem is that people who came in late have lost money investing in alt coins and token projects expecting a good return and it will take a long time for them to consider to invest once again in this market. There is a market dilution as millions have being invested in some of these projects and millions lost in scams, you can only wish if those were invested in bitcoin.

[magneto]

I think it depends. Bitcoin is a pure decentralised cryptocurrency, and it is obviously the most trusted and most adopted, while a lot of these other cryptocurrencies try to address different niches and needs that simply aren't what bitcoin is trying to target.

Is bitcoin's value diluted by this? I think to some extent in the short term, especially in bull markets where money may be flowing to other cryptos instead of solely to bitcoin.

But in the long run, what matters is still adoption. I think that people looking into other cryptocurrencies that offer different functionality won't necessarily have a negative impact on bitcoin's adoption levels. Plus, there is really no way to stop the creation of new cryptos. Bitcoin's supply will still be capped, and that won't be any different, which is a reason why I personally wouldn't get too excited about "fad" coins.

[sclmte]

ofcourse, although bitcoin or altcoin is worthwhile because without it, nobody even values ​​it even though it's another decentrilized crypto all earns the most important bitcoin, so for me it's worth really then it goes though of low cost still has this single cryptocurrency in the country. and then I still stay with bitcoin even more. so for me no matter what happens it still has value.

[deisik]

With that said, though, it is also claimed that altcoins are effectively making Bitcoin supply unlimited, i.e. without them Bitcoin price would be higher. In this manner, they are taking value from Bitcoin as if its supply were in fact constantly expanding.

There might be some element of this happening, a "dilution" of sorts. But I think it's probably outweighed by the effect altcoin markets have on the circulating BTC supply.

The altcoin markets reduce available supply in the BTC/USD (and other fiat) markets for multiple reasons. People buy BTC to send to altcoin exchanges. In addition, speculative BTC that might otherwise be traded in the fiat markets (increasing supply) stays in the altcoin markets instead. When traders transition from trading BTC/USD to altcoins, they reduce the available BTC/USD supply

I think this effect is negligible

It is so because altcoin exchanges are inconsequential themselves as most traders are still mostly interested in fiat in the end. So even if they may in fact use Bitcoin as a value transfer vehicle (which I doubt since Litecoin is mostly used for this purpose), the end effect should be pretty much insignificant. Anyway, here's the chart from Bitfinex that I made just now and which basically proves that:



As you can see Bitcoin-altcoin trading pretty much sucks compared to fiat pairs there. The difference is 10-fold, which speaks for itself

[davis196]

Saying that bitcoin is deflationary is oversimplifying.Bitcoin is a digital asset with a very elastic price.Even small changes in btc supply/demand can lead to big movements of the bitcoin price.
Nobody can prove that altcoins "eat" the value of btc,because there's no way to find out what the btc price would've been in a world without altcoins.

[andriarto]

With that said, though, it is also claimed that altcoins are effectively making Bitcoin supply unlimited, i.e. without them Bitcoin price would be higher. In this manner, they are taking value from Bitcoin as if its supply were in fact constantly expanding.

There might be some element of this happening, a "dilution" of sorts. But I think it's probably outweighed by the effect altcoin markets have on the circulating BTC supply.

The altcoin markets reduce available supply in the BTC/USD (and other fiat) markets for multiple reasons. People buy BTC to send to altcoin exchanges. In addition, speculative BTC that might otherwise be traded in the fiat markets (increasing supply) stays in the altcoin markets instead. When traders transition from trading BTC/USD to altcoins, they reduce the available BTC/USD supply.

of course this happens because the gateway to trading on altcoins is bitcoin. by first buying on btc, it will have a positive impact on bitcoin, but when they have traded to altcoin using btc, there is a negative impact on btc. but at least the more altcoins, of course, will be a positive point for btc

[deisik]

But in the long run, what matters is still adoption. I think that people looking into other cryptocurrencies that offer different functionality won't necessarily have a negative impact on bitcoin's adoption levels. Plus, there is really no way to stop the creation of new cryptos. Bitcoin's supply will still be capped, and that won't be any different, which is a reason why I personally wouldn't get too excited about "fad" coins

Bitcoin can be "adopted" only as a store of value

And in this respect it has an unbeatable advantage before any other cryptocurrency. That they can't possibly take from it, ever. On the flip side, though, it is still more of how things should be (i.e. how we hope they will be), not as much as they really are, now, with the meaning being that Bitcoin is still speculative for the most part

But as other coins are also speculative (even more speculative than Bitcoin itself), this inexorably drives us to the conclusion that altcoins can't but eat at Bitcoin's sweet pie (like the one posted in the OP) simply because that pie consists of speculations mostly, not real adoption

[exstasie]

There might be some element of this happening, a "dilution" of sorts. But I think it's probably outweighed by the effect altcoin markets have on the circulating BTC supply.

The altcoin markets reduce available supply in the BTC/USD (and other fiat) markets for multiple reasons. People buy BTC to send to altcoin exchanges. In addition, speculative BTC that might otherwise be traded in the fiat markets (increasing supply) stays in the altcoin markets instead. When traders transition from trading BTC/USD to altcoins, they reduce the available BTC/USD supply

I think this effect is negligible

It is so because altcoin exchanges are inconsequential themselves as most traders are still mostly interested in fiat in the end. So even if they may in fact use Bitcoin as a value transfer vehicle (which I doubt since Litecoin is mostly used for this purpose), the end effect should be pretty much insignificant. Anyway, here's the chart from Bitfinex that I made just now and which basically proves that:

As you can see Bitcoin-altcoin trading pretty much sucks compared to fiat pairs there. The difference is 10-fold, which speaks for itself

Uh, each of those alt/BTC pairs are doing hundreds of millions of dollars worth of volume each day. That is negligible to you? All of the BTC trading on these markets is literally taken from the spot market supply. Negligible? LOL.....

Not to mention, you're only looking at the top coins. Of course those have bigger fiat markets. Outside the top 10 or 20 coins, fiat markets are much less significant than BTC markets.

[talkbitcoin]

no i don't think so.
i have seen cases where some shitcoin on top got dumped super hard and it could successfully bring bitcoin price down with itself too but they are not big enough to put a permanent dent in bitcoin price and pull it out of its ongoing rising course over the long run.

[deisik]

There might be some element of this happening, a "dilution" of sorts. But I think it's probably outweighed by the effect altcoin markets have on the circulating BTC supply.

The altcoin markets reduce available supply in the BTC/USD (and other fiat) markets for multiple reasons. People buy BTC to send to altcoin exchanges. In addition, speculative BTC that might otherwise be traded in the fiat markets (increasing supply) stays in the altcoin markets instead. When traders transition from trading BTC/USD to altcoins, they reduce the available BTC/USD supply

I think this effect is negligible

It is so because altcoin exchanges are inconsequential themselves as most traders are still mostly interested in fiat in the end. So even if they may in fact use Bitcoin as a value transfer vehicle (which I doubt since Litecoin is mostly used for this purpose), the end effect should be pretty much insignificant. Anyway, here's the chart from Bitfinex that I made just now and which basically proves that:

As you can see Bitcoin-altcoin trading pretty much sucks compared to fiat pairs there. The difference is 10-fold, which speaks for itself

Uh, each of those alt/BTC pairs are doing hundreds of millions of dollars worth of volume each day. That is negligible to you? All of the BTC trading on these markets is literally taken from the spot market supply. Negligible? LOL

I'm curious where you see hundreds of millions of dollars in these pairs

Well, really, where did you get that, care to provide a reliable source? Top altcoins at Bitfinex barely make 10M dollars a day via Bitcoin. This is nothing compared to fiat trading volumes which are literally in the hundreds of millions. Anyway, we should compare trading volume in fiat pairs with trading volume in Bitcoin pairs, and then you will see the discrepancy. Further, I'm not sure if it has anything to do with the whole matter as such. Okay, there is some Bitcoin trading with altcoins going on and so what?

Not to mention, you're only looking at the top coins. Of course those have bigger fiat markets. Outside the top 10 or 20 coins, fiat markets are much less significant than BTC markets

Indeed, I'm looking at the top altcoins only as the rest of the pack is even less than negligible