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When Bitcoin plunged close to 40% back in the middle of December, Ripple took off, quadrupling in value in a matter of days to take second position among cryptocurrencies in terms of market capitalization. Meanwhile, other cryptocurrencies rallied in sympathy. Like Ethereum, Litecoin, NEM, Siacoin, and Bytecoin—to mention but a few.
Then, as Ripple and other cryptocurrencies corrected in the last couple of days, Bitcoin rallied.
“I wouldn’t read too much into it,” says cryptocurrency expert Kyle Samani. “The cryptomarket is 99% noise right now. In general, we see rotations between BTC and alts. First half of 2017 was alts, 2nd half was bitcoin, seems like we’re back in an alt cycle.”
There’s a good explanation behind the rotation among Bitcoin, Ripple, Ethereum, and other cryptocurrencies. Some cryptocurrencyexchanges require Bitcoins to pay for coin transactions. So, investors who already own Bitcoins have to sell them to execute those transactions.
Rotation from one coin to another isn’t new to investing. It has for years been applied on Wall Street, where investors rotate funds between “defensive” and“cyclical stocks,” at times when interest rates, ie the “opportunity cost” of money, remain low.
That’s bullish for stocks, because it confirms that money is staying within this assetclass rather than moving back into moneymarketinvestments.
And that’s bullish for cryptocurrencies, provided that interest rates remain low, and the hype for this new assetclass remains alive for some time to come.
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